In June 2016, interest-only mortgages ceased to be available for mortgages of 50% or more of the property price. Existing ones are still valid but all new loans must involve some repayment of capital every year. This applies to re-mortgaging as well as those for a new purchase. There are specific requirements depending on how much of the purchase price is covered by the mortgage – i.e. how much deposit was paid. The new rules specify a minimum repayment but there is nothing to stop the bank requiring a greater amount.
Rather than specifying a repayment period, such as 25 years, the amount is calculated as a percentage of the initial mortgage amount.
In general the rule is that if the mortgage is for 70% or more of the purchase price then 2% of the mortgage must be repaid each year. If the mortgage is for between 50% and 70%, then 1% must be repaid each year.
Two sample calculations:
Purchase price 3 million sek, with 15% deposit.
Loan will be 2.55 million sek which exceeds 70% of the property value. Therefore repayment 2% of this every year, ie 51 000sek or 4250sek per month.
Purchase price 3 million sek, with 35% deposit.
Loan is 1950000 million and this is less than 70% but more than 50% of the property value. Therefore repayment 1% of this every year, ie 19 500sek or £ 1625sek per month.
Does this apply to all types of property?
The requirement applies to apartments (condominiums) and single-family homes/villas, but not to agricultural and forestry plots.
Does this apply to a plot of land which has not yet been built on?
If the construction contract is not yet completed, the loan for the construction of the building is subject to the repayment/amortization requirement.
Does it apply to newly built apartments?
Banks have the option to waive the repayment requirement for five years for the first buyers of new homes. However, it is up to each individual bank.
What if I want to move my old loans to a new bank?
If you do not increase/extend the loan, the old rules still apply.
Can I revalue the home in order to bring down the loan rate?
It is possible to revalue the home every five years. There needs to have been a ‘substantial change in value’, e.g. an extension or renovation so rebuilding the kitchen or bathroom is not enough. The five years is counted from the date you bought the home. The new rules will apply to the new mortgage.
Are there any exemptions available from the new rules?
It is possible to obtain exemptions from the amortization/repayment requirement if you have special reasons, such as death in the family, illness and unemployment.
Are you going through a purchase at the moment? Or thinking of buying? Let us know how you are getting on in the comments below.
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Interesting bits and pieces about life in Sweden, including all-important song words.