Before you apply for a mortgage, it is important to know what loan ratio you can get. The loan-to-value ratio is the percentage of the total loan that you can have the house as collateral for. Since the mortgage loan is considerably cheaper than the top loan, it can be a clear advantage to borrow money from a bank that offers a high loan-to-value ratio. Then it is not automatically cheaper with those with the highest loan-to-value ratio, but it can be a clue as to which loan is the cheapest.
How high is the loan-to-value ratio?
The loan-to-value ratio is usually somewhere between 70 and 85%. Then there are a variety of things that control how much you will get in the mortgage. For example, if you were to buy a house that is worth a lot, but which you can buy cheaply, you can probably get a good loan-to-value ratio. If you buy a house expensive instead, the risk is that you will have a lower loan-to-value ratio. Then there are some banks that offer higher loan-to-value ratios if you take both bottom loans and top loans from them. Usually, it is also the case that villas provide a better loan-to-value ratio than holiday homes and condominiums, for example.
Exactly how high the loan ratio you get is impossible to say as there are many things that come into play. The bank simply decides what they think is a reasonable loan-to-value ratio.
A calculation example for the loan-to-value ratio
The valuation of the house or purchase price largely determines what loan ratio you receive. For example, if you assume that you are going to buy a house valued at 1.25 million and you have to pay 1 million for this house. Should you then have a loan-to-value ratio of, for example, 80%, this would mean that you can take 80% of the purchase price of 1 million in mortgage loans. The bottom line is that you can take out a loan with the house as collateral of USD 800,000. You can either take the remaining part of the purchase price as a top loan or simply pay cash.
Should it be that you buy a house for a cost that exceeds the valuation, you will only be able to borrow against the valuation. So if you pay 1.25 million for a house that is valued at 1 million and has a loan-to-value ratio of 80%, you can still only borrow USD 800,000 in a mortgage.
This means that if you buy a house that is more expensive than it is valued at, you will receive a smaller portion of the purchase price as a mortgage. Therefore, it is of course good if you can buy your home at a price that is below or corresponds to the valuation. Otherwise, you need to find money in a form other than a mortgage loan, which becomes a top loan or cash deposit.