You must have a cash stake when buying a house. We explain how it works.

Strictly speaking, a cash contribution is not part of the mortgage itself, but it is more a part of the cost to be paid to the buyer. But since the cash contribution has such a central part, we should now take up a little about this.

When you talk about financing a home purchase, it is common to divide it into three different parts. Bottom loan which is the loan the house stands as collateral for, top loan which is the borrowed money where the house is not collateral and then cash deposit.

How big is the cash contribution?

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The cash deposit is a sum that is paid directly in cash to the buyer of the house. The fact that you can pay a sum in this way shows to the lender that you have a good economy that makes them feel more secure in lending money. Then, of course, this is only part of the whole and you as a borrower also have to pass credit checks etc.

There is really no requirement at all for any cash contribution, but the usual thing is that you have one in the form of about 10%. If you have saved up so much money since before or more you are in a good situation.

If you do not have money for cash

If you do not have money for cash

It is far from anyone who has so much money saved that they can deposit 10% of the cost of the home directly. A house purchase of USD 2 million often involves a cash contribution of USD 200,000, which is a considerable sum to have saved.

If you have not saved up so much, you can still buy a house because the law does not say that you must have saved money for any cash contribution. You can simply take out a loan to be able to pay the cash contribution.

If you have to do this, it is only important to remember that this is a unsecured loan, which means that the interest rate will be higher than for the mortgage loan.

Contact the lender with whom you intend to take the mortgage loan and talk through your situation and you should surely be able to find a good solution to it all.

Pay more in cash

Pay more in cash

The usual is, as I said, around 10% in cash, but there is nothing to say that you can not pay more cash when you borrow money. Maybe only 10% will be paid when the purchase contract is signed. When the transaction is completed, there is nothing to prevent more money being paid in cash which can often be a good idea.

This is because the mortgage usually only extends to a maximum of 85% of the cost, which means that there is 15% left. If you can pay more in cash so that you reach up to 15% this means you can avoid the more expensive top loan. If you pay even more with saved money, this means that you do not need to borrow as much at all and the monthly cost is thus lower.

Of course, paying more in cash is only a good solution if you have money saved for this. If you need to borrow money to pay the cash contribution, it will instead be cheaper to take as large a mortgage loan as you can because the interest rate on this is lower.