Taiwanese Homebuyers Warned: Don't Assume 80% Mortgage Approval After Signing

Many first-time homebuyers in Taiwan mistakenly believe they will automatically receive an 80% mortgage. However, the actual loan amount depends on various factors, including the property's appraisal, age, location, and the buyer's financial health, such as savings, income stability, credit history, and existing debts.

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The bank's willingness to lend a certain amount does not necessarily equate to the amount a family can comfortably afford.

Even after agreeing on a price, banks assess the property's value independently to determine the loan amount. For a 15 million TWD property, a buyer expecting to borrow 80% and preparing a 3 million TWD down payment might find the bank only approves 70%, leaving a 1.5 million TWD shortfall. This doesn't even include taxes, agent fees, renovation, or moving costs.

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Buyers should first assume the bank can only lend 70% and confirm if their available cash is still sufficient to complete the transaction.

To avoid such situations, experts recommend conducting three key stress tests before signing. First, assume a maximum 70% loan to ensure sufficient cash for the transaction. Second, simulate a 0.5% to 1% interest rate increase over the 20-30 year loan term, factoring in all monthly expenses. Third, test for income reduction scenarios, such as one partner taking parental leave or facing reduced bonuses, and ensure enough savings remain for at least six months of living expenses and mortgage payments.

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It is important to simulate repayment amounts after interest rates increase by 0.5 to 1 percentage point, and include management fees, parking fees, taxes, insurance, and daily living expenses.

Controlling monthly mortgage payments to about 25-30% of disposable income is a good starting point. This ratio should be lower for those with existing car loans, personal loans, or higher dependent care costs. The ultimate goal is not to buy the most expensive property possible, but to ensure the mortgage allows for a good quality of life and financial resilience. Beyond the down payment, buyers must budget for agent fees, taxes, registration costs, legal fees, appraisal fees, and post-purchase expenses like renovations, furniture, and ongoing management fees.

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After completing the down payment, transaction costs, and basic renovations, it is advisable to retain at least 6 months of essential family living expenses and mortgage payments.