Own contribution and creditworthiness are the two most important issues when applying for a loan. We will not receive a loan without our own funds and adequate income. While it is easy to calculate how much savings will be needed as an own contribution to a loan, it is harder with creditworthiness, because it is influenced by several important factors.
The purchase of real estate, even if financed by credit, requires certain certain criteria to be met. One of the most important is the need for own contribution. Pursuant to Recommendation S of the Polish Financial Supervision Authority, the amount of credit granted in 2016 may not be higher than 85 percent. property values. In practice, this means that it is necessary to contribute 15 percent. own contribution.
Grant a loan of up to 90%
The regulations allow, however, to grant a loan of up to 90%. values provided that part of the missing own contribution is insured. This means that in some banks 10% is enough to obtain a loan. own resources. However, this is the minimum threshold and we will not get a loan without these funds.
For example, when purchasing a property worth USD 380,000, you must have a minimum of 38,000 savings. In practice, however, we must be prepared for a slightly larger expense, because the purchase of real estate and taking out a loan are connected with the need to pay notary fees, in the case of the secondary market of civil law tax or commission for granting a loan. It may turn out that additional fees amount to even around 5%.
Own contribution from the budget?
The Flat for Youth program gives you the opportunity to cover all or even part of your own contribution. As part of government subsidies for own contribution, we can receive 10, 15, 20 or 30 percent. property values.
These amounts are often lower than the contractual percentage values due, inter alia, to the area to which the surcharge is charged. In practice, the surcharge can range from 6 to 25 percent of the value, so it will not always cover the entire own contribution required. Marriages, single parents or unmarried couples can apply for a loan with an additional payment. Unfortunately, for 2016 the pool of subsidies has been exhausted, currently you can apply for such loans only if the payment of the last tranche for the property and the activation of the subsidy takes place in 2017 or 2018.
How much do you have to earn?
Next to your own contribution, credit standing is another extremely important element. The loan may be granted only to those persons who, in the bank’s opinion, earn enough to be able to pay the loan installment on time after paying all fees. Each bank takes into account in its calculations installments of loans that we already repay, as well as limits granted in credit cards or revolving loans in the account. However, it is worth noting that even if we do not use a credit card, it will be calculated as our potential commitment. Of course, the burden will not be all the allocated limit, but about 4-6 percent of this amount.
However, this will reduce our credit standing and sometimes it is worthwhile organizing your finances and eliminating unnecessary products on the occasion of a loan. The number of dependents also affects creditworthiness. Other options for obtaining a loan are a lonely person and another family with 2 children, even if the income and liabilities are identical. In recent months, many banks, under the pressure of the Polish Financial Supervision Authority, have tightened their requirements and assume more realistic costs than before when calculating creditworthiness. Currently, one person in a household should be counted on about USD 800 on the cost of living.
This means that, for example, a marriage with 2 children, in the bank’s assessment, devotes a minimum of USD 2400-2600 to maintenance. Only after taking this amount into account can you count how much you can spend on the installment of the new loan. For example, assuming that a family of 4 reaches a total income of 7,000 net and no other financial liabilities, the creditworthiness will be about USD 550,000.
This means an installment of approximately USD 2,600. If a loan is granted to a family with 1 child who earns 6,000 net and has no financial obligations, the creditworthiness will amount to approximately USD 480,000. Then the monthly installment will be about 2250 USD for the 30-year period.
Check for yourself how much you can afford
In addition to the bank’s creditworthiness examination, it is also very important to calculate your financial capabilities yourself. The amount suggested by the lender is obviously a guide, but everyone should also count on what installment they are ready for, how much they can pay each month. It may turn out that the example of USD 380,000 calculated by the bank and installment, for example in the amount of about USD 2,300, is too large for our financial capabilities.
We will have such a monthly commitment if we take out a loan for 20 years. We will pay lower installments if we extend the loan period by several years. If we repay the loan for 30 years, then the installment will be around USD 1,800. For a 35-year repayment period, it will amount to approximately USD 1680. When calculating your options, you should also remember that the interest rate and installment are variable. As a result of interest rate increases, the monthly installment may increase by up to several dozen percent. We should also consider this scenario when estimating our capabilities.
Who can get a loan?
A person with a stable income can apply for a home loan. Contrary to popular belief, this does not mean that only employees with full-time employment can count on credit. Term contracts are also honored, although this cannot be a contract that expires in a few weeks. Banks expect the current agreement to remain in force for a minimum of 12 months. People working on contract or specific work can also apply for a loan.
If we only regularly generate income in this form, then the path to credit is not closed to us. Business people are also desirable by banks. In this case, however, it must be carried out for a minimum of 12 months, although many institutions require a minimum of 24 months. Of course, the condition that all borrowers must meet is impeccable credit history. If we have previously paid our liabilities late, we will not receive a loan.