16 Oct 2009 10:11 AM:
Good day Dave.
It will depend on how you deem the 'best' deal. For example, is your driver the maximum borrowing, the best rate of interest, a fixed rate perhaps, the maximum 'Interest Only' term or indeed just a straight forward Repayment type (capital and interest).
If you have 40% available that implies a 70% mortgage taking into account the costs/fees of the purchase and mortgage. But not necessarily so! By this I mean that a large number of properties being sold today are at a discount to the market and we are seeing bank valuations exceeding the contractual price. Where this is so, the need for a 70% reduces to perhaps 60% and then lending terms can be more attractive.
For example, let's assume a purchase of €100k and that you have €40k as an investment. 70% on a valuation coming in at the same level would be €70k. But, if the property valued at say €130k, then lending could be up to €90k, thus reducing your cash investment to €20k (€100k plus costs less €90k). Or, for better terms, you could pump in the €40k so the mortgage needed would be just the €70k = 53% of the value.
I hope that makes sense!
Most lenders base lending on the Annual Euribor plus a margin (to cover their costs). The lower the % of loan, the lower their perceived risk and the better the terms. Normally - in this tight lending market - the margin today would be 1.5% to 1.75%. Much higher than it used to be. But with the example 53% this could be negotiated to say 1.25% thus reducing the pay rate from as much as 3.5% to closer to 3%.
And then there is the issue of 'Interest Only' for the attractive lower monthly payments and added protection. These tend to come at a slight premium (0.25%) over an ordinary Repayment (capital & interest type). And, if the property is being purchased as a holiday home or investment, then cash flow is often important and thus Interest only that much more atrractive.
You see that 'best' is not as simple to respond to as one might expect!
Thread:
Why is the Euribor rising again?
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