For the vast majority of people, it is impossible to buy real estate without taking a loan. Few people are ready to buy their dream home or real estate in cash. At present, a big problem may be bringing in own funds, in the amount required by the bank. We have to borrow the rest from the bank. Regardless of whether we are buying our first house or refurbishing, we will most likely find a suitable offer for us.
Mortgages should be repaid monthly, in the amount required by the bank. Installments are specified in the loan agreement. The repayment period is usually 25-30 years.
The length of the commitment
Buying a home will probably be our biggest life investment. It will also be our largest debt. We will be paying back our mortgage for many years, which is why we must pay special attention to the installment amount. If it’s not too high, we won’t have a problem with monthly repayment.
Traditionally, customers decide on a 25-year loan repayment period. However, given the retirement age, 30-year mortgages are becoming more common. They can lower your monthly payments, but on the other hand, the debt will be higher. So if we can afford, let’s get a 25-year mortgage better. Then we can save a lot.
Mortgage rates are usually lower than any other financial liability. It is secured by real estate. This means that if something goes wrong and we can’t pay it back, there is still something valuable – our property – which you can sell to pay back some, if not all, of your loan.
We will pay a lot more than we borrowed
The most obvious disadvantage is that we decide to take a huge debt. Another serious disadvantage is that because our mortgage is secured on the property, we must pay back the loan taken on time so as not to lose our house or apartment.
Although the monthly amount we will have to pay seems reasonable, the total amount we will have to pay back over all these years is huge. Let’s watch out for additional fees.
Before we decide on a loan, let’s collect the largest possible own funds. Then the interest rate on the loan will be definitely lower. It is best that we put aside our own funds in the amount of 35-40% of the property value. If our own funds are at 10%, we can get a loan offer with a much lower interest rate. In other words, let’s save as much as we can
We will need to have good credit standing to qualify for the best mortgage offers. So let’s order a BIK report before we go to the bank. In this way, we will avoid unpleasant surprises, and we will also have time to improve our ability. We pay off all unsecured loans and credits and close all accounts and credit cards that we no longer use. Otherwise, the bank may be concerned about our amount of liabilities.
Other valuable advices
No bank will offer us a loan if we don’t have all the required documents, e.g. ID card, driving license and passport (if we have one). Among other things, we must collect documents confirming the source and amount of income. We can also prepare bank statements. If we receive other income, e.g. child benefit, we will need documents to prove it.
Self-employed workers are often upset that they need to prepare more documents than full-time employees. However, we can not help it and prepare properly in advance. We must provide a statement or documents confirming the non-arrears in the payment of ZUS contributions and timely payment of liabilities to the tax office. It is also worth presenting, if we have, a Financially Trusted Company Certificate. It is published by BIG InfoMonitor. It can affect whether we get a mortgage and how much. In addition, banks will definitely check us in the registers of the Credit Information Bureau (BIK). Banks will also check our financial condition meticulously. They verify the flow of funds between the company and external entities. Such information is contained in our accounting books. In this way, experts at the bank can calculate their creditworthiness over the last 12 months.
Let us remember that it is necessary to obtain a stable income to receive a loan. Therefore, banks diligently check whether our account receives less the same amount every month, and if not, what are the differences. So they should not exceed 30%, otherwise our mortgage application may be rejected.
Period of business activity
We also need to run our business for a long time. We usually have to run the company for at least 24 months if we want to get a loan. A lot depends in this situation on the bank and the loan amount we apply for. Therefore, let’s carefully analyze the individual offers.