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Things worth knowing about mortgages

This is what you should think about when you apply for a mortgage.

You can save a lot of money on moving your loan to a new bank! Check if you have a competitive interest rate by comparing it with loan offers from other banks.

We recommend that you check the links at the bottom of this article to obtain the best possible conditions.

If your mortgage rate is higher than what other banks are offering, you should ask the bank to give you a lower mortgage rate or consider refinancing the loan at another bank.

Buying a home requires financing

If this is the first time you are buying a home — or if you already have your own home — you will need to be able to show the seller that you can finance the home purchase if your bid is to be seriously considered in the bidding round. You obtain documentation by applying for a financing certificate from a bank in advance. If there are several of you who will be financing the home purchase, you apply together.

How long it will take to process the application depends on how simple the relevant information is, how quickly it can be documented and the bank’s need for time to process the application.

Not all banks offer mortgages

Some banks only offer mortgages to people residing in, or affiliated with, the bank’s geographic market area.

How much should you borrow?

Borrow no more than you know you can afford to pay in the short and long term. When assessing your own ability to pay, you should emphasize how much, with a high degree of certainty, you can expect to have as long-term stable income that you can use to pay interest, fees and loan installments. If you have a loan or credit with a floating interest rate, you must also take into account that the borrowing rate may be higher. The bank looks at your total debt when your ability to pay is assessed. You must also do this in your calculation.

The lowest interest rates offered by banks often require you to buy more banking services and have an active relationship with them. It can therefore be an advantage to spend some time on this and provide information about all your banking services if the conditions are competitive.

What does it take to get a mortgage?
Buying a home should be one of the most momentous events of your life, and you will find many banks and credit institutions offering different types of mortgages on the market. Some banks have a special lending profile, but in the sections below, we describe general requirements, which apply regardless of the type of mortgage you choose.

Ability to pay and willingness

No one will lend money to someone they already know does not having the ability and / or willingness to repay. In order to get a loan, you must have an income large enough to service the loan, in addition to other fixed expenses you have. The higher your income in relation to your fixed and variable expenses, the better your ability to service loans. When applying for a loan / credit, you must prove to the bank that you will be able to pay for the loan as agreed, in the short and long term. If there are several of you who will be responsible for the mortgage, you apply and are assessed together.

The bank will require that all relevant information for the loan application be documented, with emphasis on the ability and willingness to pay, equity, security and customer relationships. At a minimum, you are expected to document income, debt and wealth.

How long it takes to process the application depends on how simple the relevant information is, how quickly it can be documented and the bank’s need for time to process the application.

Avoid debt collection

If you do not pay bills or debt collection claims, you can get a payment remark in the Brønnøysund Register. This can prevent you from being granted a mortgage application.

Make sure you have a credit score and find out if you have active payment remarks before applying for a mortgage.

Equity

No matter what type of home you want to buy, the bank will assume that you have saved up a certain percentage of the purchase price in advance, have accumulated equity in the home you own or can offer the bank security, for example, with your parents’ home.

The better security you can offer, the lower the mortgage rate you should expect the bank to offer you.

How much you already owe

How much debt you already have determines how much of your ability to pay has already been “used up.” In the credit assessment, the bank takes into account your total debt burden, i.e., all debt you already have in the form of credit (credit line credit cards, account credits, etc.), student loans, consumer loans, car loans and the like.

Customer relationship and payroll account
Some banks require that you have had an established relationship with the bank for some time before they are willing to consider a loan application for you. If a bank has previous positive experience with you, it will always be viewed positively when applying for a loan. Therefore, it is also an advantage to have an account and customer relationship with more than one bank.

When it comes to granting and establishing a loan, it is often a condition that the borrower and co-borrower have or create an account and that the term amount for the mortgage (interest, installments and term fee) can be automatically deducted from that account. When the bank assesses your willingness to pay, they look at several things, including if you have payment remarks or overdrafts on your account. Having these can prevent you from getting a loan.

Security

Security

If the bank grants you a mortgage, the bank will demand security for the loan by establishing a mortgage on the home. The collateral gives the bank the right to demand that the home (the mortgage object) be sold if you do not pay for the loan in accordance with the loan agreement, so that the mortgage and accrued overdue loan costs are repaid.

How good the bank’s security the mortgage is will be determined by the value of the home in relation to the desired loan amount. The main rule is that the better the bank’s security for the loan, the lower the mortgage rate you should expect to be offered.

Banks and credit institutions place higher demands on serviceability and security than public actors do. People who are not granted a loan from private banks or who lack equity can apply for a start-up loan to buy a home through their municipality.

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    Refinancing

    If the home has risen in value, the security may be better than it was when you took out the loan, meaning you qualify for better loan terms without having to refinance. If you know or believe that your home has risen in value, you should contact the bank to ask the bank to reconsider your loan terms.

    You should consider refinancing your mortgage with a new bank if the savings you want to achieve will be greater than the costs you have to pay to refinance. When refinancing, you must expect to pay the establishment fee again. In addition, you will have to pay a registration fee and costs to determine the market value of the home.

    Refinancing a mortgage is also relevant for new borrowing or to reduce borrowing costs, if you have more small loans and credits. By consolidating several loans into one loan, the total borrowing costs for the debt will be reduced. But you should choose to repay small loans and credits with the same repayment period as planned even if you “bake the loans” into the mortgage. If not, you will, in practice, for the car long after it has lost its value and you may have paid more in loan interest for the consumables / credit than you would have paid if the loans had remained as individual loans.

    Interim financing

    If you do not intend to sell your current home before entering into a contract for the purchase of a new home, or you are going to take over a new home before the old home is transferred to a new owner, you need intermediate financing. Interim financing is a short-term, and as a rule, installment-free mortgage.

    When a financing certificate or loan has been granted, the mortgage is established and payment / repayment of a current loan.

    Sign agreements and authorization forms

    If, after processing the loan application, the bank wants to give you a loan offer, the bank will contact you to agree to sign loan agreements, and the mortgaging and settlement form. You will possibly also get authorization forms for transfer / repayment of loans or credit card debt, all depending on what you agree on.

    Many banks give you financing certificates and loan commitments in the online bank and offer the opportunity to sign the loan and mortgage documents with your electronic ID.

    Establishment of mortgage – disbursement / repayment of current loan

    As soon as the bank has established the agreed security and mortgage, the loan will be ready for disbursement. On the takeover date, the mortgage will be paid out by the bank to the seller. When moving a mortgage to a new bank, your new bank will ensure that the loan(s) from your old bank are repaid with the new loan.

    Good luck with your residential housing project

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