Buying a first home without any savings or other security is, for example, limited by the statutory loan cap. A loan cap means that you must have savings or other security when buying a home. Therefore, it is a good idea to start saving for your own apartment well in advance, even if buying a home is not yet timely.
Buying a home, especially for a young first time home buyer, is virtually the only security on a home loan, because other assets have not yet been accumulated. In this case, you need to have a portion of the cost of your home saved upfront so that the bank can grant you a mortgage. There are many options for saving, such as an ASP account or different funds, in addition to the traditional savings account. Here are the tips for buying a new home for you now.
How Much Savings and Extra Collateral Should I Have?
The amount of savings required to purchase a home is influenced by the legal maximum loan-to-value ratio, that is, the loan ceiling and collateral value of the home. As a general rule, you must cover 30% of the cost of your home with either savings or other security.
The bank may grant a mortgage to a first home buyer on the basis of a loan ceiling of up to 95 percent of the price of the home. For other home buyers, the loan cap is 85 percent.
The self-financing part must be covered either by your own savings or by other real security such as a parents’ apartment or summer cottage. In addition, you need additional 25% collateral, as the collateral value of a home is usually 70% of the price of the home. Additional collateral include, for example, the State Guarantee on a Mortgage Loan or a Credit Guarantee.
Saving to your ASP account
The ASP, or Home Savings Plan, makes it easier to buy a first home. An ASP account will save 10% of the estimated cost of a future home for at least eight quarters. You can start saving for ASP at the age of 15-39 even if you don’t have a regular income. Once you have reached your savings target, the bank can provide you with the remaining 90% as an ASP loan with a maximum repayment term of 25 years. Check out your ASP account>
Benefits of ASP
- 1% deposit rate + 4% tax free extra
An annual deposit rate of 1% is paid on ASP savings, which is higher than the normal savings account rate. Plus, you get an additional 4% * interest on new ASP opening accounts when the ASP conditions are met and your home is bought with an ASP loan. Exceptionally, interest and surcharges are exempt.
In accounts opened before October 1, 2009, the amount of additional interest shall be at least 2-4% per member bank.
State-guaranteed ASP loan up to 90% of home price
The bank will usually grant a mortgage of 70% of the value of the home and the difference will usually require additional security. With ASP, you can get a state-guaranteed ASP loan for up to 90% of the price of your home without a guarantee premium. The guarantee is limited to a maximum of EUR 50,000.
Free government interest subsidy for 10 years
If the interest rate on your ASP loan exceeds 3.8%, the State will pay 70% of the interest. You can get an interest subsidy for ten years.
