When you buy a home, you often need to borrow money to cover the cost. You will then cover most of the cost of the home with a mortgage loan. This mortgage loan normally extends up to a maximum of 85% of the cost, a little depending on different circumstances.
Then it is also common for you to pay a cash contribution of about 10% of the cost. Remaining will then be at least 5% of the cost to be covered in some other way. The way you cover this is through a top loan.
Top Loans are unsecured loans
Since the home is the collateral for the mortgage loan and you borrow as much as you can, there is no value over which the home can be collateral. This means that the top loan becomes a unsecured loan.
The fact that there is no collateral behind the loan means that it is a more expensive loan to take than the bottom loan. For this reason, it is a good idea to try to get rid of top loans altogether. For example, if you have saved money together so that you can pay 15% of the cost in cash, you have good opportunities to avoid the top loan altogether. If you have saved away a sum of this size, you also show the lender that you take responsibility for your finances, which means that they feel a greater confidence in you as a borrower, which is positive.
If you need to take out a top loan also it is not the whole world but hopefully the cost does not have to be immediately high every month. What distinguishes a top loan and a regular private loan is that you can often repay the top loan for a longer period of time than the private loan. The maturity can often be 10 – 20 instead of 1 – 12 years.
What is important is that you do not forget to count on this loan in your budget for the mortgage.
Since you have to borrow without collateral, it becomes a little more expensive and then it costs a month each month. Similarly, do not forget to include any loans to cover the cash contribution. Hopefully you have the money saved but if you have borrowed it will of course also be repaid every month with interest.