High amount and long repayment period – these are the main features of most mortgage loans taken by individual clients. Such an obligation is usually intended for the purchase and renovation of an apartment or building a house. The loan is secured by a mortgage entered in the land and mortgage register, giving the bank the priority right to satisfy itself from the proceeds from the sale of the premises.
With the increase in real estate prices, the average amount of mortgage granted on the Polish market increases. The highest liabilities are incurred in large cities, where the purchase of an apartment implies the need to commit several hundred thousand zlotys. When comparing the offer of housing loans, one should pay attention to many factors – the banks’ proposals differ not only in price parameters, but also in terms of the own contribution and products suggested by the borrower under the so-called cross selling.
Since 2015, customers taking out a mortgage must have an own contribution of at least 10%. the value of acquired property. However, not all banks are ready to accept such a payment. Several institutions apply the standard threshold provided for in the KNF recommendation and expect a double contribution.
Therefore, if the real estate we have seen costs 350,000 PLN, we should have savings of at least 35 thousand. zł. Twice the amount available will allow us to apply for a loan at all banks, and also count on slightly better price conditions.
The cost of the mortgage
The interest that we will pay on the capital borrowed from the bank can be calculated in one of two ways. Loans with fixed interest rates are based on a fixed rate set by the bank before signing the contract. At present, lenders in Poland do not offer such conditions throughout the entire repayment period – the interest rate is fixed for the first few years, and then we can decide on this formula again or switch to variable interest rate.
The variable rate is based on the sum of two components. The first is the indicator from the interbank market, which may change from day to day. In the loan agreement, the bank indicates how this interest rate component will be determined (e.g. every quarter, based on the last quotation in the previous month). The second element is the credit margin. It is usually constant throughout the entire contract period.
The amount of the margin usually depends on several factors – the amount of the loan, the amount of own contribution, the borrower’s risk (including his credit history) and the features of the property. Customers who decide to purchase additional bank products, e.g. setting up a personal account or buying insurance, can count on lowering the credit margin. This practice is called cross-selling or cross-selling.
It is worth noting that the margin may be higher or lower than the value indicated in the contract for a limited time. The first case concerns the period to enter the mortgage in the land and mortgage register and the debt to be reduced until the customer covers 20%. property values (if we incurred a liability with a low own contribution). The second scenario usually takes place in promotional offers, where the bank applies a reduced rate for a short time.
Pay attention to fees and commissions
The total cost of the mortgage, in addition to interest accrued on outstanding debt, also includes other items. The first is the commission for granting the loan. Usually it is paid after signing the contract (in cash) or added to the commitment. Its amount can usually be negotiated, also if you apply for a loan through an intermediary.
The second element may be a fee for real estate valuation. A potential borrower must usually cover it at the stage of applying for funding. Some institutions, however, allow you to add it to your loan after obtaining a positive decision.
The third cost component is bridging protection. It is paid for the first few months after the contract is signed, until the mortgage entry for the bank is disclosed in the land and mortgage register. The bank may charge this fee as an increased margin or as a separate commission.
The lender may also require additional loan collateral, the establishment of which involves costs. An example is life insurance, unemployment insurance or similar. A summary of the mortgage costs will be presented to us in the information form when we turn to the bank or loan broker with a request for simulation.