Amortization Requirement
Business

Amortization Requirement

Amortization Requirement

Amortization is the amount you pay off your loan. The more you repay, the more you reduce your loan and your future interest expense. Read more about amortization and what the amortization requirement means!

 

How much do I have to repay according to the repayment of amortization requirement?

Your repayment is calculated based on how much you borrow in relation to what the home is worth and your income.

  • Mortgages over 70 percent of the value of the home must be repaid with at least 2 percent of the total loan amount per year.
  • Mortgages over 50 percent up to 70 percent of the value of the home must be repaid with at least 1 percent of the total loan amount per year.
  • If you borrow more than 4.5 times your annual income before tax, you must also repay 1 percent of the total loan amount per year. If several of you are applying for a mortgage, it is your total annual income before tax that applies.
  • If your mortgage is 50 percent or less than the value of the home and you borrow less than 4.5 times your annual income before tax, there is no requirement for amortization.

Further down this page, we have collected some calculation examples of what amortization could look like.

Do you want help with your existing amortization?

Do you want to make an extra repayment, pay off your mortgage or change your repayment plan? Contact us and we will help you.

Read also: Pharmacy Benefit Management Market Overview Report 2022-2027 

Questions and answers about Amortization Requirement

How much do I have to repay if I raise my mortgage?

If you took out a mortgage before 1 March 2018, you can choose to repay according to the so-called alternative rule. This means that you repay the new loan in 10 years and that existing mortgages are not affected.

Can I re-evaluate the home and reduce the amortization?

If you have taken out a mortgage after 1 June 2016, the value of the home (amortization-based value) is locked for five years. After these 5 years, you can evaluate whether the home and your amortization can be reviewed.

You may be able to revalue the value of the home within the 5 years if there has been a significant change in value, which cannot be linked to the general price development. For example, it could be that you have made an extensive renovation or extension. Renovation of only the kitchen or bathroom or extension of the balcony is not considered to give a significant change in value.

It’s been five years since I received my repayment value, what happens now?

Nothing happens, you continue to repay as before. It is only when you want to borrow more that we set a new amortization-based value, which is then based on today’s market value.

What happens in the event of separation and divorce?

If one party wants to stay in the former joint home, it is possible to take over the mortgages and keep the same repayment. This presupposes that the mortgages are taken before 1 March 2018 and no new loans are taken in connection with the separation.

Can I get amortization free on my mortgages?

If you find yourself in a financially difficult situation, it is important that you contact us as early as possible. In exceptional cases, you can then be granted amortization freedom for a limited period. The exceptions are not general but are tested on a case-by-case basis.

What is the shortest time I can repay a mortgage?

You must have an amortization period of at least 10 years for your mortgage. If you want to pay off the mortgage faster than in 10 years, you can do so by extra repayment.

Calculation example of amortization requirements

Example 1:

You want to buy an apartment for SEK 2,000,000 and borrow SEK 1,700,000. You earn SEK 300,000 per year before tax. Your amortization will be 2 percent + 1 percent:

  • You borrow 85 percent of the value of the home (1,700,000 / 2,000,000) = 2 percent repayment.
  • The loan amount is higher than 4.5 times your annual income = 1 percent repayment.
  • This means that your total amortization will be 3 percent of SEK 1,700,000.

Example 2:

You and your partner already have a mortgage on your villa of SEK 2,000,000. You have a joint annual income of SEK 600,000 before tax. You buy a holiday home for SEK 1,800,000 and borrow SEK 1,100,000. Your amortization will be 1 percent + 1 percent:

  • You borrow 61 percent of the value of the home (1,100,000 / 1,800,000) = 1 percent amortization.
  • Total borrowing (2,000,000 + 1,100,000) is higher than 4.5 times the annual income = 1 percent amortization.
  • This means that your total repayment will be 2 percent of SEK 1,100,000 (the loan amount at the holiday home). The previous mortgage on the villa is not affected.

Leave a Reply

Your email address will not be published.