Equity for mortgages
You must have 10% equity + costs
Lending regulations from 31.12.2024:
– lowers the equity requirement for mortgages from 85% to 90%
– can add income growth during a period of fixed interest rate
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Lowering the equity requirement for home purchases
The equity requirement for mortgages will be lowered from 15 to 10 percent on 31.12.2024. This means that it will be easier for many people to apply for a loan to buy a home. In this article, we explain what this means for those who want to buy a home.
In addition to lowering the requirement for equity to 10 percent, the change will also better facilitate fixed-rate loans.
To apply for a loan with a floating interest rate, you must be able to withstand an interest rate increase of 3 percent or an interest rate of at least 7 percent in order for the bank to approve the loan. In other words, if you apply for a loan of NOK 4,000,000, an annuity loan over 25 years with a 7 percent interest rate, you must be able to pay NOK 28,271 per month in interest and installments.
The lending regulations are also being amended to better facilitate fixed-rate loans. Banks can now make individual assessments for families with children, for example, and assume income growth during the fixed-rate period. The growth must be realistic, but it is likely that your income will increase somewhat during a 5 or 10-year fixed-rate period.
Frequently asked questions about equity
If you’re buying a 3 million euro home, the minimum equity requirement is 10%. This is equivalent to 300,000 in equity and 2,700,000 in loans. In addition, you must have money to cover the costs. Costs are lower for housing cooperatives than for freehold properties.
Simple formula to calculate how much loan you can get based on your equity: put an extra zero after the sum of your equity minus your equity. Example: You have 450,000 in equity, add a zero and you get 4,500,000 minus equity 450,000 = loan sum: 4.050.000
This is the money you have in your own account and which you use as part of the payment for e.g. a home.
Equity is the money you provide yourself in addition to a loan from the bank. According to the Financial Supervisory Authority’s guidelines, you need 10.00% of the property’s purchase price in equity (excluding additional costs).
If you want to find out how much equity you need to buy a home, you can simply multiply 10% by the purchase price. Example: The home has a purchase price of 4,390,000. Then the calculation is as follows: 4,390,000 x 10% = 439,000 in equity. If the prospectus states that the costs are 125,000, you must have this amount in addition. The total need for equity is then 439,000 + 125,000 = 564,000.
It is possible to borrow 100% of the purchase price + costs if you have a secured creditor who can offer a mortgage on their property. Here you can read more about mortgages with a guarantor
Banks can also grant a proportion of loans that do not meet the 10% equity requirement. Nationally, these quotas for mortgages are 10% (i.e. 10% of all loans issued by the bank per quarter may deviate from the 10% requirement). In Oslo, the quota is smaller and only 8%.