|
|
|
|
|
|
by sofixa
1494 days ago
|
|
|
I don't see what the deposit has to do with loan repayment capacity. You can have a couple with stable good paying jobs, but they must waste money in rent for a few years to be able to save enough for an upfront deposit? Evaluate on their salary and job prospects. Here in France the deposit isn't a hard %, but banks expect it to be able to cover "notary taxes" ( what you pay to the notary and the state for the acquisition, which is usually in the 2%-8% range). |
|
|
Salary and job prospects presumably have some correlation with one's ability to repay a loan. However, a much more reliable data point is saving capacity i.e. Income - Expenses. How far your income takes you inherently varies based on the life-style you live.
Does it suck throwing money down the toilet on rent? Absolutely! However, in most (not all) markets, home loan repayments will be quite a bit greater than rental repayments. If someone is unable to pay rent and simultaneously save a deposit - then chances are they aren't going to be able handle the loan repayments.
Also, looking at someone's current salary is not a good indicator of someone's ability to pay off a home loan over an extended period of time. Deposits typically take a while to save i.e. it's not a matter of having a high paying job at one point in time, it's a matter of whether one can sustain their income (keep their job) and budget for an extended period of time (many data points).
Even then - this is only part of the equation. Deposits aren't just a method for banks to assess potential borrowers. Initially banks buy/own the majority of the house (all with zero deposit), not the borrower. A deposit (and often insurance) are required to protect the bank in case the borrower does default - they need to be able to sell without losing money if prices fluctuate. Actually, it's not just price fluctuations. There's expenses involved with selling - agent fees, taxes etc.
An alternative to all this would be to significantly increase interest rates to mitigate the risk - which is also non-ideal.