Are you one of those students who have not been able to get hold of a student housing for the upcoming semester? If you have grown tired of living in your home or otherwise, an alternative might be to buy a home. But how do you go about financing the home purchase as a student? We go through this.
How to go about buying a home as a student
The challenge of buying a home as a student is that you probably do not have a large income while studying. On the contrary, your student debt may be increasing. This is the most common reason why banks often deny students mortgages. The risk is simply too great that the student should not be able to afford to pay the loan costs. But luckily there are several solutions if you want to buy a home while you study:
1. Leave someone else on the loan
If you have a person with good finances in your area, an alternative might be to leave them on the loan. For example, it could be a family member, relative or partner. So instead of taking out a loan, this person is the rightful borrower. One advantage of this solution is that it is the other person’s ability to pay that is assessed by the bank, and not your own. This means that you will receive a lower interest rate than if you had been on the loan yourself.
Something that is good to know is that many tenant-owner associations require that those who live in the home should own at least 10% of it. Otherwise, it is calculated that the apartment is rented out in the second place. Also keep in mind that it is important to agree on payment responsibilities and the like, even though you are family or friends.
2. Borrower – Borrow with someone else
Another solution for those who want to buy a home is to get a co-borrower who is on the mortgage with you. The co-applicant then has an equal payment responsibility for the loan. This means that if you are unable to pay the loan costs and repay the bank, the bank will demand the money from the co-borrower. The advantage of using a co-borrower is that the chance increases for the loan to be granted and that you get a lower interest rate. In this case too, it is important to sign a co-borrower agreement, so that the co-borrower is protected if payment problems arise. You also need to agree on who will pay the down payment to the seller.
How much to borrow?
Whether you take the help of a co-borrower or someone else is on the loan, it is important that you understand the requirements that come with the loan. By law, you cannot borrow more than 85% of the value of the home, the remaining money you need to save together. You also need to be aware of the new amortization rules, they decide how much to repay the debt each year. In this way, these factors determine how much the housing can cost. It is stupid to buy an apartment that is so expensive that you risk not being able to repay and pay the loan costs.
Compare loan offers
There are many demands on you as a borrower, but you must also not forget that it is up to you to choose a loan with good terms. To succeed, you need to compare loan offers and loan promises from several banks. We can help with that.