Most people borrow money from a bank when they want to buy a home. It is normal for a bank to require the buyer to have some money (capital) of his or her own so that they are not borrowing all the money their home will cost. However, banks have different rules. The interest rate one has to pay on the loan also depends on what percentage of the property’s value one has borrowed .
It is a good idea to check several banks’ terms and conditions before taking out a mortgage. A mortgage will affect you and your family’s finances for many years to come. It is also a good idea to investigate whether or not the local authority has any loan schemes that may apply to you. Husbanken has special loan schemes for young people and others who need help buying a home. These schemes are administrated by the local authorities.
There are two main types of mortgage:
In the case of an annuity loan the instalments are the same amount throughout the repayment period, assuming the interest rate does not change. To begin with the interest portion of the instalment is high and the repayment portion of the instalment is low. As the loan is repaid, the interest portion decreases and the loan repayment portion increases. When the interest rate changes, the instalment amounts also change. The loan period remains the same. Total interest costs are higher for an annuity loan than for a serial loan. Most people choose an annuity loan because the monthly loan costs are lower at the start.
With a serial loan the interest portion is the same throughout the entire repayment period. The interest amount, and thus the instalment amount, decreases as you repay the loan. Total interest costs are lower for a serial loan than for an annuity loan because you pay larger repayment instalments early on during the repayment period.
Here is an example illustrating the repayment and interest amounts for a serial loan and an annuity loan. The loan amount is NOK 1,000,000 in both cases, the interest is 4% and the repayment period is 25 years.
Most banks’ websites have interest calculators. These allow you to enter various loan amounts and repayment periods. The calculator then works out how much you will have to pay each month. You can also do the opposite, in other words enter how much you can pay to the bank each month and find out how long the repayment period will be.
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