Amortization is what you pay back on your loan. Since new repayment requirements were introduced, there is much to think about in new mortgages. We at the Johnson family are happy to help and answer any questions you may have.
The amortization rules are
• If the loan amounts to a maximum of 50% of the value of the home, there is no repayment requirement.
• If the loan is 50-70% of the value of the home, the loan should be amortized by at least 1% per year.
• If the loan exceeds 70% of the value of the home, the loan must be repaid by at least 2% per annum.
• No one can borrow more than 85% of the value of the home.
• Should the borrower’s income be less than 4.5 times the value of the home, then an additional 1% should be amortized per year.
• Banks may allow amortization for up to 5 years when buying new production, but this is unusual.
• The rules apply to private individuals and all types of home purchase loans.
The amortization requirement is at most 3% per year
You may therefore most need to repay 3% of your home loan per year.
If you want to take additional loans to buy a holiday home, for example, then this is included in the calculation together with your regular mortgage loan. This makes it more difficult to find a loan space for a second home.
If you change your bank, then you should keep your old loan’s repayment rules. If your old contract says that your loan is amortization-free, then it should apply to the new bank as well.
The rules are complicated, so you have to think about that. Therefore, it may feel safe for you to have the Johnson family’s knowledgeable advisers at hand. We answer your questions and help you get the best possible conditions.
The amortization requirement, which was tightened by 2018, was introduced in order for Financespoken to prevent economic imbalance and a financial crisis. Households are considered to have too high debt and therefore want to curb lending.
There has been criticism against the fact that the amortization requirement reduces the mobility in the housing market and that it excludes young people outside. There is also a concern about lock-in effects, as many choose to stick to their old loans.
The amortization requirement is also called debt quota braking.