April 27, 2016
Not long ago the business world have discussed the mortgages with negative rates in Denmark. At the end of 2015 the bank really paid to the borrower $ 38 as an interest. Does this mean that now all clever investors will invest exclusively in Denmark? Not at all.
As described in The Wall Street Journal, the borrower took a mortgage with a floating interest rate. In the last quarter of 2015 the rate dropped to -0.0562%. However, since the value of the Euribor is constantly changing, credit conditions are changing as well. In other words, no one can predict the size of the rate in the future. The probability that the rate will increase to 3-4% in a few years also exists.
With a fixed interest rate borrowers are protected from those risks - the percentage is the same for the entire loan period.
Lowest fixed interest rates
Fixed rate mortgage in Denmark is not negative. The average is 3%. In Germany the conditions are more favorable: the mortgage term of 15 years issued under 1.9% per annum. At the moment, the lowest interest rate among European countries is in Switzerland. On average it is 1.75%.
Switzerland is followed by Finland with 1.83%, Germany and Luxembourg (2%). All these countries have high credit ratings and negligible inflation.
The loan amount and loan terms
In Switzerland, the mortgage is issued mainly for 10 years, the loan amount reaches 80% of the property cost. Banks in Finland can give up to 75% as a loan, but in some cases may be 100% loans, and loan term may be extended to 25 years.
Germany is interesting because the loan body is paid already after expiration of loan period. Similar conditions are typical for Switzerland.
In Luxembourg, you can get a mortgage for up to 30 years, the loan amount - up to 80% of the property cost.
Yields on deposits in European banks today is close to zero, so for Europeans investing in real estate (including the mortgage loans) have become extremely popular way to preserve and increase revenues. The high demand for square footage only stimulates offer.
The above mortgage lending rules apply only to residents. Foreigners buy properties on less favorable terms. The rate increases, the loan amount decreases.
In addition, citizens of other countries will have to prove their ability to pay with various documents. In some countries, almost there is no practice of granting mortgages to foreigners. For example, the Russians almost can not get a mortgage in Bulgaria and Montenegro. But in Germany, Spain, France, the United Kingdom terms for borrowers of Russia is quite acceptable.