A mortgage is a long-term bank loan whose main security is a mortgage established for the benefit of the bank. In general, it is granted to finance the purchase of real estate – a house or flat. We take a closer look at the solution that makes it possible to fulfill the dream of own accommodation.
How to choose the best mortgage?
Poles pay attention to the price, therefore the best loan will be the one with the lowest costs. Given that this is usually a long-term commitment, the price criterion seems to be the most appropriate. Keep in mind that taking out a mortgage entails a whole range of fees. The most important is the margin, affecting directly the amount of accrued interest. Then we have a commission for granting a loan, notary costs, life insurance and accidental events, as well as loan insurance until the mortgage is established.
You also have to count with the assumption of a land and mortgage register, mortgage and property valuation. In special cases, we may encounter a preparation fee or a commission for processing the application – it is charged to the borrower regardless of the final decision of the bank. All fees related to the receipt and subsequent repayment of the loan are its cost. In the selection of the best offer, it will be useful to compare websites that evaluate almost all the parameters of a potential mortgage loan (some of them are independent of bank rates, eg an entry in the land and mortgage register or an expert service).
The amount and source of income is important
Applicants must face a number of bank requirements before the bank finally decides to grant financing. In the verification process, known as the assessment of creditworthiness, the client is screened in many possible ways. In particular, the Bank looks at the income of a potential borrower – their amount and source. Then, the owned property is verified, the credit history used so far, the age of the applicant and the possibility of establishing additional security. However, this is not all. The bank may request additional temporary securities, eg a third-party surety, another credit insurance, blocking of funds (eg on a bank account or term deposit ) or signing of a promissory note.
Banks usually require own contribution in the amount of 10 to 20 percent of the value of the property. The higher the own contribution, the greater the client’s negotiating advantage, which may seek to lower the margin or convince the bank to give up some of the collateral. The mortgage contract contains a number of provisions, which may result in subsequent fees incurred by the client in the future. It may be a commission for early repayment of the loan (usually collected within the first 3 years for financing) or the necessity to re-evaluate the property after a certain period of time. After the initial acceptance of the loan application, the client is asked by the bank to provide further documents. In the end, we are talking about obligations that often reach several hundred thousand zlotys.
How to calculate the mortgage installment?
After verification of the submitted documents, the borrower receives information on the amount of the liability, margin and repayment date. These parameters are the result of creditworthiness analysis. Thanks to this, the bank adjusts the installment amount to the applicant’s real financial capabilities. The creditor scrupulously estimates the fixed costs that the client incurs in his daily life – bills for the flat, for utilities, maintenance payments, liabilities to other banks, children’s maintenance costs, etc.
The customer can choose two installments options – fixed and decreasing. In the second case, the amount of initial installments is about 20-25 percent higher than the calculated average installment, which can mean that the client will not have creditworthiness to get a loan. The complexity of the entire assessment process means that the bank’s client is unable to calculate its creditworthiness on its own.
In the case of a mortgage loan, it is also important that the liability towards the bank will last for many years and the situation of the person repaying the loan may be subject to multiple changes. The mortgage repayment can also be calculated using the mortgage comparison engine or relevant applications available on the internet. However, it should be remembered that this is an approximate calculation, indicating a certain order of values. Despite this, it is worth comparing the received values with the results presented by the potential creditor.
Measure your strength for intentions
Borrowers performing such calculations usually have a tendency to overestimate their abilities, which is why it is worth to calculate their own calculations with banks’ forecasts. The latter – depending on the situation – may treat customers differently or more liberally. As a result of the financial crisis in 2008-09, most banks tightened the criteria for granting mortgage loans. Therefore, it is more difficult to get such a loan and its costs have visibly increased.