Thanks for this good explanation. That means, if we find a house for example for 200k, but the bank's appraisal of the property is estimated at 250k, is the interest rate better for us? Conversely, of course, it is worse if the appraisal is below 200k. Now I also understand why an interest rate is generally hard to predict. Many thanks!
Exactly.
It depends on several factors. In brief and without completeness:
- personal creditworthiness (income level, permanent or temporary employment contract, how long employed at the current employer, which industry the employer is in [due to job security], which installment payments on consumer loans still need to be paid, etc.)
- ratio of desired financing to the lending value of the property, including the question of how much equity is contributed.
- and of course the question of whether the bank even wants to finance this particular property – lending value aside. For a "normal" house, no issue. But for example, some banks refuse to finance a property if there is a commercial business in the house (e.g., multi-family house with a shop below). Or the bank finds the location so bad – e.g., due to proximity to a highway, noisy industrial settlement, ... – that it fears it won’t be able to resell the property in case of foreclosure and therefore does not want to finance it. No worries, these cases are rare. For a "normal" house or condominium, you will almost always find a bank that basically(!) says: Yes, we would finance the property and then it just depends on your creditworthiness.