Equity for a mortgage
When you are buying a home, you need equity.
What is equity, and how much do I need?
Equity is the money you must provide yourself when buying a home, in other words the portion of the purchase price that is not covered by the mortgage.
To buy a home, you generally need at least 10 per cent of the purchase price as equity. This means we can usually lend you a maximum of 90 per cent of the funds for the home purchase. By adding together the size of the loan you can receive plus your equity, you can determine the maximum amount you can spend on a home – your borrowing capacity, which you can also calculate in the borrowing capacity calculator.
Remember, however, that to obtain a mortgage, you must also have the financial means to cover the monthly costs and a clean payment history showing that you pay your bills. The best way to find out what you can afford to spend on a home is to apply for a completely non-binding pre-qualification letter.
Mortgage without equity?
Although you generally need to have 10 per cent of a property's value in equity to be able to buy it, there are options for you if you lack the funds in your account.
Ung (Young Adults) billion
At DNB, we have something we call the Ung (Young Adults) billion. Many young people find it difficult to enter the housing market, often due to high equity requirements. With the Ung (Young Adults) billion, you can get a mortgage, even if you lack some of the equity for the home purchase.
Although DNB as a bank must comply with the lending requirements in Norway, known as the lending regulations, we can still deviate from some of the requirements for certain customers every six months – including the equity requirement. The Ung (Young Adults) billion works by usLending out two billion extra per year, to young people who do not meet the full equity requirement for their home purchase.
Guarantor
Many people enter the housing market with the help of a guarantor. A guarantor is someone who provides a guarantee to the bank to repay another person's mortgage if they are unable to do so themselves. This means you do not necessarily need to have equity for a property yourself, because the guarantor provides additional security to the bank.
The most common way to act as a guarantor is through what is known as a mortgage guarantor. In this case, one's own property is used as security for another person's mortgage. Many parents choose to help their children enter the housing market in this way. Since they have often paid off a large portion of their own loan, they have available equity that the bank can use as collateral.
A person can also act as a guarantor by providing security with funds in an account. The account with funds can then be blocked until the home loan is repaid to the agreed amount.
How to build equity faster
Entering the housing market usually requires a solid deposit, but there are several smart ways to save it up.
Savings in BSU home savings scheme for young people
BSU savings is one of the best savings methods for you if you are young and wish to save for a home. You receive both a good interest rate on your savings and a tax deduction each year, whilst the money is set aside for a home purchase.
If you have filled up your BSU account or cannot save in the BSU home savings scheme for young people, there are other high-interest accounts you can consider saving in.
Funds and shares
Fund savings and shares offer the potential for higher returns, but it is wise to think long-term and be aware of the risks that come with investing your money in this way.
Get yourself an income
It is wise not to rely solely on student loans or be dependent on financial support from parents or others. A job or another source of income gives you greater freedom and control over your own finances. If you have the opportunity, it is smart to set aside a little for home savings – even small amounts can grow over time and contribute to your equity.
Parental help
Many young people receive help from parents to get started with their equity. This can be, for example, through an advance on inheritance, or by parents acting as guarantor or co-borrower.Parental assistance has become quite common, but remember that it requires trust and clear agreements.
Buying a home together with someone
Get an easier route into the property market by buying a home with a friend, sibling or partner.
Buying a home?
There is plenty of good advice you can take with you on your home-buying journey – from when you dream of moving, to when you have the keys to your own home.
