Not enough equity or savings for a mortgage loan? Here are your options
The home buying process can be challenging, especially if you are up against the financial barrier of insufficient equity. Fortunately, in these modern times, there are several alternative routes available that can ease this challenge. Let's take a closer look at some of these options.
Content:
- Government programmes to help buy a home
- Private investors and co-buying
- Family support and the principle of 'donation'
- Immotokens' co-purchase option
- Extra loan in addition to your mortgage
- Other alternative financing options
1. Government programmes to help buy a home
Several governments have set up programmes to support homebuyers, especially those struggling to raise the required down payment. For instance, subsidised loans or grants may be available for first-time homebuyers. By taking advantage of such programmes, you can cover part of the required equity.
In Belgium, several regions offer support measures for homebuyers. In Flanders, for example, there is the 'Flemish housing loan' for families with limited income.
Example: Imagine a family in Antwerp wants to buy a €250,000 house, but has only €20,000 of own funds. Through the Flemish Housing Loan, they can borrow the missing €30,000 at a reduced interest rate.
2. Private investors
There are investors in the market who are willing to invest in real estate with individuals. These are often larger funds looking for interesting investment projects.
3. Family support and the principle of 'donation'
Another option is to seek financial help from family members. In some cases, family members may be willing to donate or lend money to help finance the down payment. However, make sure that any loans or donations are properly documented to avoid any future conflicts. In Belgium, you can donate up to a certain amount tax-free to family members. This can be useful for the purchase of a property.
One option is for your parents (or others) to give you a tax-free gift for your home. Up to an amount of €28,947 (in 2023), this can be done tax-free and you can use it as equity. Amounts above this limit are also possible, but you will pay gift tax on it.
Example: Els from Ghent needs €25,000 for the down payment on her new house. Her grandparents donate this amount to her, giving them tax benefits and allowing Els to buy her dream house.
4. Immotokens' co-purchase option
An innovative solution for those struggling to raise sufficient equity is the co-purchase option from Immotokens. By matching buyers and investors, Immotokens makes home buying more accessible to many. This option allows potential buyers to realise their real estate dreams without waiting until they have saved enough.
Example: Mark wants to buy a €350,000 loft but lacks €70,000 in equity. Through Immotokens, he finds an investor who contributes this amount in exchange for a share of the rental income.
5. Extra loan in addition to your mortgage
You can take out a separate loan alongside your mortgage in certain situations. This is especially if you can get a higher mortgage on income than on home value.
For example, if you can take a €350,000 mortgage on income but are buying a €250,000 house, you might consider a personal loan of around €15,000 for the additional costs.
6. Other alternative financing options
Beyond the options mentioned above, there are other alternative funding routes. For example, consider peer-to-peer lending, where you borrow money from individuals instead of traditional financial institutions. Another option is a 'lease-to-own' model, where you rent a property with the option to buy it over time. Some Belgian banks offer 'bullet credits' to, where you only pay interest during the term and only repay the borrowed amount at the end.
Example: Sofie from Mechelen wants to buy a €280,000 house but can only contribute €40,000 of her own funds. She takes out a bullet loan for the remaining €40,000 and pays only the interest each month.
Conclusion:
While lack of sufficient equity can be an obstacle, there are several paths that lead to your dream home. By exploring your options, being prepared and adopting innovative solutions such as Immotokens consider, you can strengthen your position and bring you closer to realising your real estate dreams.
