What it is like to get a mortgage in different countries across the world
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For most of us, we save for a deposit, apply for a mortgage then spend approximately 30 years paying it back until we own the home.
Whilst there are various types of mortgages available in our country, the home-buying process is always the same — unless that is you have the cash to buy a property outright.
However, there are many countries overseas that have a completely different methods and schemes to us when it comes to buying a home.
These countries below each have alternative ways of getting people onto the property ladder, and this is how they differ to ours, according to research by Online Mortgage Advisor.
Sweden
In addition to the standard proof of a steady income, Swedish banks use the following calculations to determine how much they’ll lend you:
However, in certain cases, it might be possible to get an additional unsecured loan — but a higher interest rate would then be charged and the loan would have to be paid off in a shorter time frame.
New loans have to be repaid at the rate of 2% per year until the loan is down to 70% of the property’s value, and then at 1% per year until its reduced to 50%
A maximum mortgage of five times your pre-tax annual income is seen as standard, which is slightly higher than the UK average of 4.5 times your annual income.
Singapore
Singapore has the second most expensive housing market in the world — meaning 80% of the country’s residents live in government-built and subsidised units, such as high-rise flats.
But for those who are able to buy their own house, most banks offer mortgages at fixed or variable rates.
In most cases, the banks will offer loans of up to 60% or 80% of the purchase or valuation price, whichever is lower, and the buyer will then have to top up the remaining amount in cash from a Central Provident Fund account.
Buyers in Singapore will also have to factor in the Total Debt Servicing Ratio, which limits the monthly debt obligations to 60% of a salaried person’s income.
Interest rates can often work in the favour of the borrower in Singapore, so getting a mortgage pegged to a variable rate might be more beneficial — as some of the variable mortgage options are based on the rate that Singapore banks exchange money with each other, which tends to be a more resilient option.
Canada
Similarly to Sweden, Canada has interest rates that are secured for five years on average, and the max loan term is only 10 years.
France
The general rule of thumb in France is that you can borrow five times your individual or combined income for a repayment mortgage.
However, in France you must have net assets outside of your main residence which equal at least the value of the interest-only mortgage.
For example, if you want to borrow €1million through an interest-only mortgage, you’ll need to have at least that amount stored away somewhere.
The main thing considered when someone wants to take out a mortgage in France is the debt-to-income ratio, and it’s the main thing that can derail the property dreams of even the richest person.
Banks will look to see if your existing monthly payments for loans and mortgages exceed one third of your gross monthly income.
So, if you have two children in private education, the term fees for the school will not be reviewed in your outgoings.
South Africa
Generally speaking, to secure a mortgage in South Africa you’ll need a minimum deposit of 50% of the property’s purchase price.
Although lenders offer a choice of either fixed or variable interest rates, most mortgage lenders in South Africa opt for a home loan on a variable-rate basis, with a maximum of 30 years available.
Fixed rates are much less common due to the noncompetitive rates offered by banks to offset the risk of volatile interest rates.
Whichever mortgage type you choose, a loan in this country will generally have to be paid off by the age of 70.
United Arab Emirates
If you’re taking out a loan to buy a property in the UAE, you’ll typically need a deposit of at least 25% for a property worth up to AED 5 million.
Borrowing is capped in the UAE, so the amount you’re borrowing cannot be more than your total anticipated earnings for the next seven years and, in Dubai, mortgage payments are capped at 50% of your monthly income.
The mortgage market in the USA is very well developed, but it operates slightly differently to how it does in Europe.
In America, a key calculation used in the mortgage application is the debt-to-income ratio, which will establish whether you can maintain the mortgage repayments along with your existing loans.
This must not exceed 50% of your gross monthly income, so some lenders will be looking for very detailed information about your financial status.
Mortgages are available in the US for up to 75% of the property’s value, with most of them being on a repayment basis, with the maximum term being 30 years