A home loan can be divided into two different parts; top loans and bottom loans. The largest part, which is at the bottom, is the bottom loan. The loan is secured against mortgage deeds issued in the house or tenant-owner’s right. Different lenders have different levels of how much of the housing value is placed in the bottom loan. Bottom loans may not exceed 70-85% of the value of the home.
This usually finances a home purchase.
The top loan is the part of the housing purchase that is financed with another loan. The loan is a blank loan. Previously, it was common for banks to call the upper part of the mortgage loan for a top loan, but since there is no security placed on the home, it is in practice a private loan.
At all housing purchases, one must pay 15% today in cash. There are many who add saved funds. If you do not have any savings, you can borrow for the cash, if you have the right financial conditions.
For new loans, the top loan and the bottom loan together may not be in excess of the 85% housing value, this according to restrictions according to guidelines from the Swedish Financial Supervisory Authority.
A common question home buyers ask themselves is “ How much can I borrow? “. Read our article about it to get some more meat on your legs before negotiating with banks.
Differences between top and bottom loans
|Security||Amount of market value||Repayment Requirements||Interest|
|First mortgage||Mortgages||up to 70-85%||Yes No||Low|
A top loan is a loan with variable interest and demands for repayment. Amortization is usually done every month and a repayment period of 5-15 years is common.
January 2015 also tightened the requirements for amortization on bottom loans. All new mortgages will then be amortized down to 50% in the longer term. For loans that amount to between 70-85% of the market value, an annual repayment of 2% must be made. Thereafter, the rate is lowered and borrowers with mortgages of between 50-70% are to repay 1% per year.
When the bank lends money for the purchase of a home, one wants to secure the loan with the home as collateral. The bottom loan is fully secured by a mortgage bond. It does not do the top loan and hence it follows that this type of loan is more expensive, which means that the loan interest rate is higher. Sometimes, the lender may require another type of security for the top loan, such as a guarantee.
Risks with top loans
Since the bank has no security for the part of your home loan that is like a top loan, the interest rate is higher. If the housing market falls and you have to move for some reason you risk having loans of more than your home’s value. You risk being seated with the top loan for a long time to come.
Are top loans in practice a blank loan?
Yes, it’s the same type of loan. Both loans are without security and have a higher interest rate than the bottom loan. The term top loan is used when the blank loan is taken when buying a home. A blank loan can otherwise be applied for without telling what the money should go to.
Tip! If you recently refurbished or if the prices have risen a lot lately in your residential area, request a valuation and change your loans. Maybe you have a top loan that can be converted to a bottom loan? This would mean lower interest expense and that your repayment will be at a slower pace.