A savings loan is a loan in the residual value that you have in your home, in everyday life you also call it “eating your bricks”. The loan is taken up to free up part of the savings you have made in your home over time.
With a savings loan you can release part of the value of your home against the bank or other credit institution getting a mortgage on your home. It will typically be a mortgage-free loan where it will only be repaid when the property is sold.
Why take out a savings loan?
A savings loan is a loan to, for example, pensioners who want to sweeten life as a pensioner by making use of their savings in the added value. As a pensioner, you typically do not have the same income as when you were in the labor market, which means that you cannot have the same consumption you used to have. Here, a savings loan can provide a little more money by using the savings you have made in your home over a long period of time.
Of course, it can also be taken up by other than remove who want to withdraw some money from their housing before it is sold.
Can you make savings loans through mortgage letters?
In the same way as a mortgage loan or a mortgage loan in the bank, a mortgage loan can be used as a savings loan. However, as with ordinary home buying, this is a slightly more expensive option, the mortgage bonds usually have a slightly higher interest rate. However, there may be other benefits to using mortgage letters including the flexibility.
Most banks find it difficult to make savings loans to people after they turn 60, reducing one’s ability to borrow money and reducing the size of the loan. Mortgage letters offer a slightly more nuanced assessment and it can often be possible to get a reasonable loan despite one’s age.
How much can one borrow?
In a typical savings loan with the mortgage lenders, you can borrow up to 60% of the value of the home, where for mortgages this can be up to 80%, however this depends to a large extent on the condition of the home, the type of property and the geographical location.
This means that if you have a home worth 2 million. You can borrow up to USD 700,000 with a mortgage loan of USD 500,000 and a mortgage debt of USD 500,000, so you have a total loan of USD 1,200,000.
On the other hand, if you take a savings loan through mortgage letters, you can borrow up to USD 1,100,000, here you will have a total loan of USD 1,600,000.
This is what a savings loan might look like
You have a home worth USD 1,500,000 and you owe only USD 200,000 in it. You want to borrow USD 600,000 as a savings loan and have a plan for the property to be sold in 10 years.
Interest-free 6.5% interest:
- Monthly benefit gross: USD 3,250.
- Residual debt after 10 years: USD 650,000
Low monthly benefit with installments of 6.5% in interest (25 years):
- Monthly benefit gross: USD 4,500
- Residual debt after 10 years: USD 500,000
When the property is sold after ten years, you will either have to pay approx. USD 650,000 back for a mortgage-free loan or USD 500,000 back for a loan with small installments.