How much money should you borrow from a bank to buy real estate: 30%, 50%… or based on your ability to repay?

March 21, 2022 11:18 GMT+7

Using financial leverage is a way for investors to realize the purpose of increasing the rate of return in the decision to put money into real estate. For homebuyers to live, a bank loan is also a short way to help them achieve their dream of finding a place to live. What home buyers and some investors are confused about, how much is a reasonable rate of bank loan? Up to now, banks lend up to 80% of the value of real estate products. Meanwhile, the stage of assessing debt repayment capacity through the borrower’s income is no longer so important.

In fact, there is no universal formula for the rate of bank loans to buy real estate. And each investor or borrower to buy a home has very different views.

Mr. TM (leader of a real estate business in Hanoi) shared that his opinion is that the maximum amount of bank loans should be borrowed. The reason that Mr. TM gives is that the profit that real estate brings is always more than the interest on bank loans. From his own experience, Mr. M. posed the question: “Why not fully utilize the capital that the bank provides to increase total assets. A plot of land purchased in 6 months has been profitable since 10 -20% and wait 1-3 years, the profitability will be up to 50%-100%. The profit level is higher than the interest rate that the bank is lending at present, 6-10%/year.”

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Meanwhile, from another point of view, Mr. Tran Khanh Quang, a real estate expert, said that if the property has a nice, good, cheap location, buyers should not borrow money up to s70-80% of the price. property value to buy. Explaining this, Mr. Quang analyzed, the principle with real estate, even with goods, is to sell before buying. I bought it cheap but couldn’t sell it, it also created a huge cost. If you hug the bank again, it’s very risky.

On the other hand, according to Mr. Quang, in the current market context, the market is trading slowly, but products can be bought at a good price. be fast at this point. That said, investors should consider short-term – medium-term – long-term plans.

Meanwhile, Dr. Su Ngoc Khuong, Senior Director of Savills Vietnam admitted that many investors buy land of 2 billion, after 1 year increase by 2.5 billion is normal. And the price increase of 20-25% within 1 year when the bank interest rate is 8-10%, and the deposit is 5-6%, choosing to invest in real estate is an investment that many people are aiming for.

Even when the market is difficult, investors still participate in the market if using little financial leverage. Investors with a capital flow of 75% of the total amount that can be purchased for real estate will tend to borrow 25% of the bank. Holding it for a year and selling it for a profit of 20-25% is normal when the market recovers. The interest rate calculated on the total loan amount within 1 year is not much compared to the profitable value of the real estate. Most of them will buy now and sell when the market is good.

According to Mr. Nguyen Manh Ha, Chairman of Loc Son Ha Land, there is no common formula for the ratio of bank loans for each person to borrow for real estate investment or buy a house. Mr. Ha said that 30%,50%… is not as important as the debt repayment capacity of homebuyers. If the repayment capacity is good, the income is high, they can borrow the maximum. If their debt repayment capacity is low, they cannot bear the pressure, then they need to reduce the bank loan rate.

Sharing more about the issue of bank loans for investment, Dr. Dinh The Hien said, not all investors have capital to invest, but most have to borrow from banks. Some people have enough capital to buy one house, but they borrow from banks with a very high rate, up to 80% to buy many apartments.

When investing, they expect the price of high-end apartments to increase, have the opportunity to “surf”, make a profit… they use very high financial leverage (bank loans), taking the apartments themselves to form in the future. mortgages for investment loans. According to Mr. Hien, this development actually has some similarities with the years 2006 – 2007. But when the house was received but could not be rented or the rental price was too low to cover the bank debt, the landlords This investment is forced to sell at a loss to get money to pay the bank. Many people with the same action will make waves. The process of cutting losses to pay the bank took place more than 10 years ago.

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