Home, loan | Warns against the household trap: – Money just flies out

Although Norwegian homebuyers are facing an uncertain housing market these days, there is still plenty of activity in the market. Nationally, the price growth so far this year has been 6 percent.

– Even though Easter falls entirely in April this year, the turnover is huge. Eiendom Norge CEO Henning Lauridsen said of the latest figures for the housing market, volumes on par with pre-pandemic years so far in 2023.

The housing dream lives on – but banks are forced to tighten lending. Monja Ørvik, Head of Individual Markets at Sparebanken Din, highlights intermediation financing here.

– And we clearly say no. It’s painful when you’ve found your dream home, but sitting with two mortgages and not being able to sell is even worse. Imagine today’s interest cost, electricity cost, municipal tax if you don’t sell for four months. There are big costs, Ørvik points out. He stresses that it is wise to consult with the bank in such cases.

Do you have an unfortunate experience with interdisciplinary funding that you think should be highlighted in the media? Contact the journalist here.

The questions flow in

Cecile Tvedenstrand, consumer economist at Storebrand, says many Norwegians have questions about transitional financing.

– There are many questions about this. “Should I buy or sell first?”, “What should we do now?”, “Should the housing market go down?”, “Should interest rates go up?”, says Tvedenstrand.

He outlines several trends that contradict each other.

– It’s a complex market. A rise in interest rates usually means a fall in prices. But Tvedenstrand says that few new buildings have been built – and then there will be pressure on prices.

Either the bank says no, or they are stricter than before, Ørvik reports.

Sperbanken Tin can see which area you are selling in and how quickly it is selling in that area.

High interest

How likely is your home to sell? There are many risks involved if you are financing a home.

– When you buy a home before selling it, you have a bridging finance loan. Over a period of time, you have two houses and three loans. Interest rates are increasing these days. It can be difficult financially. You must pay off your debts today. Just because you’re in the home process doesn’t mean you’re not servicing the loan, says Ørvik.

Bridging loans typically have a slightly higher interest rate than a “regular” mortgage interest rate.

– Banks offer short-term loans because your money is in the walls of your house, says Ørvik.

Tvetenstrand also asserts that interest rates may be higher:

– Bridging loans can have interest rates up to two percentage points faster than normal mortgages. He says it could be 6 to 8 percent.

From house to apartment?

The biggest fear is not being able to sell the house.

– Maybe there was a time when everything looked bright and people were waiting to sell. Then you end up with two houses and can’t sell. There are also those who list a newly purchased home.

It can be expensive.

– Selling and buying a house costs a lot. You pay brokerage fees and expenses for buying a new home. Money just flies out. If you had to pay a broker to sell the house you bought, you might have paid 150,000.

Mortgage customers moving from a house to an apartment can also have challenges.

– Those who find it difficult are those who bought apartments with high joint costs, and then you may not be able to sell the house. You bought an apartment, and that’s probably a joint debt of NOK 12,000 a month, manageable if you didn’t have two mortgages.

– There are many considerations to take into account, adds Tvetenstrand.

You may have to sell below appraisal

A consumer economist points out that you may have to sell the home below its appraised value. He illustrates that you are going to buy a house that requires a million in equity. To get a million in equity, you need to sell the house for NOK four million – but you need to sell it for NOK 3.7 million.

– Then the bank has given you a loan based on another equity capital. Some people are lucky enough to receive a down payment on their inheritance. Others have saved money in funds, but most do not have 300,000 kroner. It can also be examined whether new loans can be raised accordingly. For most people, this is resolved in a conversation with the bank, but this is not a good situation.

The most important thing is to be aware that there is a possibility that you will not be able to sell the property for the price you want:

– Calculate a buffer. Things may not go as you expect. Deduct 10 percent or more from the asking price if you find the area is slow to sell. This is also something that banks often take into account.

Many people have money in funds, but in today’s market it is far from easy to withdraw money.

– You may be forced to do so. The bank may require you to do so, says Tvedenstrand.

– Bored to get surprises later

Ørvik advises Norwegians to take their time if they are considering selling their home for a new home.

Arvik says come quickly and contact the bank.

If you have thoughts about moving houses during the year, “What should we think about”, “How should we proceed” and “What options do we have?” are related questions for bank.

– It’s so boring to get surprises afterwards.

In conclusion, Ørvik points out that the bank does not want to be a fool.

– We banks make a living through mortgages. We’ve seen that if you say no, you run the risk of not being able to run it. If a bank says no, that’s also good advice.