12 lipca 2021

13 myths about a mortgage

There are many false statements in the loose circulation. In today's post "13 Myths About Mortgage" I would like to show you the most common discrepancies with credit reality. So today you will find out:

  1. whether no credit history means that you cannot get a mortgage;

  2. do you have to pay back more than twice as much when taking out a mortgage;

  3. do you need to have a 20% own contribution;

  4. is the bank just waiting to take your property?

 

 

 

1. Lack of credit history means a negative decision

 

Although it sounds strange to many, there are still many people in Poland who fulfill their consumption needs with savings. Buying a property, as it goes beyond the simple saving option for Kowalski, is the only acceptable form of debt for them. Here is the first myth - without a credit history, you will not get a loan for an apartment or house. There is no problem with getting a mortgage if your credit history is clear. I have completed about 250-300 loans for people who had no contact with loans before buying the property. However, this urban legend is unbeatable. They write about it on economic portals, they talk about it in banks, bloggers create entries, and somehow it does not translate into reality. An iron loan does not increase your chances. You can get a PLN 500,000 mortgage without a credit history, but you probably won't get a PLN 50,000 cash loan. In the case of a mortgage, the bank has real estate as security. Of course, there are some exceptions. Everything is a matter of the limit. If you apply for a mortgage, e.g. over PLN 1 million, then the credit history is even recommended. Historically, these types of loans are much worse repaid. The loss ratio, which is determined at the level of around 11%, must be leveled by the bank and its approach to such high liabilities is much more rigorous.

 

 

2. BIK scoring is important


It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using 'Content here, content here', making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for 'lorem ipsum' will uncover many web sites still in their infancy. Various versions have evolved over the years, sometimes by accident, sometimes on purpose (injected humour and the like).

 

3. Submitting multiple applications reduces your chances of getting a mortgage

 

Mortgage brokers carry out over 55% of mortgage loans. How do you think bank advisers have an opinion on this? By operating only one offer in the first message to the client, what will be the argument? I have always submitted at least 2-3 loan applications. There were situations when I had to apply for a mortgage at 4-5 banks at the same time. I have never encountered a situation where such a number resulted in a refusal to grant a loan. It is normal for a mortgage analyst that there will be several loan inquiries in BIK. I do not know a single case that ended in a refusal to grant a loan due to the number of submitted applications.

 

4. You must have 20% of your own contribution

 

A myth that takes a blush at the turn of September and November periodically from around 2015. Banks, large consulting companies and smaller market participants try to scare clients that the rules regarding own contribution have been changing since January. All this to push the sale at the end of the year. The truth is that at the moment there are 10 banks on the market that grant loans with a 10% own contribution. Of course, it comes with a higher interest rate, sometimes with low down payment insurance, but you can still get financing with less than 20% of the property value. At the moment, there are no reasons for this to change in the future.

 

 

5. A mortgage is a rope around your neck

 

According to official data, loans are taken for an average of 25 years. The maximum permissible loan period is much longer and amounts to 35 years. It is actually a very long time and different situations can happen during this time. Illness, job loss, rising interest rates. Statistically, however, loans up to PLN 1 million are repaid very correctly. Non-performing loans, i.e. overdue more than 90 days, vary from 1% to 1.9% depending on the amount taken. The city's legend shows that it is not as bad as some people claim. People somehow cope, but as it happens in life - there are probably all sorts of accidents. Remember to build a financial cushion in addition to paying off the loan. Count your monthly living costs and try to save money. If you have money for a rainy day at least 6 months ahead, it is likely that any problems will not cause that the myth of the neckline mortgage will affect you personally. You just have to look after your mortgage.

 

6. When taking out a mortgage, you have to pay back more than twice as much

 

It all depends on the interest rate on the loan, the loan period and possible loan overpayment. By standardizing and looking at Kowalski's loan in laboratory conditions, you will give away different amounts depending on the loan period, which to the surprise of most is the king of the hunt. Therefore, consider whether it is worth taking a mortgage for the longest period of time, or it is better to tighten your belt and try to choose a shorter period.

 

7. My bank will give me the best conditions

 

I don't know where this belief comes from. A myth that is familiar to the entire credit intermediary industry. On the one hand, this is probably due to the laziness of those who seek, and on the other hand - the willingness to feel appreciated by banks for many years of loyalty and cooperation. Many of us have an account with this particular bank for several or several years. Banks, however, have a completely different view of this. Some time ago I read business statistics and it turned out that acquiring a new client costs less than maintaining the old one. In addition, various marketing activities related to the promotion of credit cards, insurance, investment funds were probably already carried out with the old client, and we do not know what else. If the client said no more than 15 times, he would not actually buy anything from us. The new customer means new sales statistics and new opportunities. This is, in a nutshell, the top-down decisions in banks. Apart from 2-3 examples, the banks do not offer any price deviations for their own clients. This is one of the banking tricks.

 

 

 


8. The most important are low cost, low  RRSO  and low installment


Banks calculate the total costs according to their own formulas. Comparing contracts, decisions or information forms may result in wrong credit decisions as they will be based on different models. Moreover, the mortgage is not fully countable. It contains several important issues that cannot be included in the cost, APRC or loan installment. In my opinion, early repayment is an important factor. According to the law, banks may charge a commission of up to 3% for the first 3 years. It is worth paying attention to whether the bank provides an overpayment through the account or you need to go to a branch. Can the loan period be shortened, do you have to annex and pay dearly for it? When taking out a loan with a cyclical overpayment in mind, you should look at the lack of start-up and early repayment costs. Margin, RRSO and total cost come second. I also pay attention to additional products that the bank may require to grant a loan under certain conditions. There are banks, such as Bank Pocztowy, Pekao Bank Hipoteczny, which do not impose any requirements. On the other hand, there is Millennium, which requires an account, a high income from remuneration, an ATM card with a turnover of min. PLN 500 per month. Many times, my clients have decided to take a theoretically more expensive, but more comfortable loan

 

9. The broker collects a commission from the client

 

The Mortgage Act separated the functions of advisers and intermediaries. According to the act, neither entity has the right to charge a commission from both parties to the transaction - the bank and the client. The advisor or broker must choose their path and decide whether they charge a commission from the client or the bank. At the first meeting, the client has the right to find out whether the specialist's service will cost him extra or not. In fact, 99.9% of specialists do not charge a commission from the client, but from the bank for a positive conclusion of cooperation.

 

10. The broker looks at his interest, not the interest of the client

 

Here I can only write for myself and for the part of the market that looks at its responsibilities professionally. As a rule, the broker receives remuneration only when he finalizes the transaction. So this is a plus for the client. The broker should be oriented towards carrying out the client to pay the mortgage. It is a team game for one goal. 10 years ago, when I started my business and started helping clients in obtaining mortgage loans, I assumed that numbers would never break me and always, but always, I would be guided by the interests of the client. For many years, my business has been based on the recommendations of satisfied customers and people who come back after a few years with new ideas for their investments. In addition to the aspect of honesty that you do not have to believe (everyone can write nice words), I can see that even if I withdraw a loan from a bank that pays a lower commission, my hard work and honesty pays in the future in the form of recommendations from satisfied people .

 

 

11. You cannot take out a mortgage while working on a mandate contract or a contract for specific work

 

Banks most strongly target borrowers who earn income under employment contracts for an indefinite period. Statistically, these people have the least problems with loan repayment. However, it is not true that if you have a specific work contract or a mandate contract, you cannot take out a mortgage. You can, but you need to meet a few more requirements. Most banks will require a minimum of 12 months of seniority retroactively under this contract. Your contract may end up in the month in which you submitted your loan application. A few banks will cut your income by 20% in the case of a mandate contract or will only add 50% of the proceeds to the account under the contract for specific work.

 

12. A small mistake and the bank will take my property

 

The bank is as much interested in the correct repayment of the mortgage as you are. It is a myth that the bank is just waiting to take your property and sell it. In the case of badly repaid mortgage loans, banks have to create reserves, i.e. lower their capital. Information about unsuccessful loans is published in lists that are published on the stock exchange. This could cause investors to lose confidence and hence the bank's share price to fall. If there is a bailiff enforcement, usually the valuations carried out at the request of the bailiff are understated. The bailiff will sell the property at a price corresponding to 3/4 of the value of the survey, and a large part of the sale will go to the bailiff's pocket. However, it is worth mentioning that the 2017 Mortgage Act civilized solutions in the event of serious problems with repayment. In the event of problems with repayment, the bank must propose solutions such as: credit holidays, extending the loan period, setting a grace period. If such ad hoc solutions do not help and both parties come to the conclusion that there is no chance of restoring proper repayment, the bank must give the borrower a minimum of 6 months to sell the property on its own. Thanks to this, the borrower can sell the property at the market price, and thus regain his own contribution and close the investment to zero.

 

13. When refinancing a loan, I pay the interest anew

 

Mortgage refinancing is still a novelty. Since few people had contact with it, there is information on the market that refinancing would involve the need to repay interest anew. This is where the mathematician bows, who, unfortunately, is neglected in Polish schools. The idea of ​​refinancing the loan is to obtain better conditions in the form of a lower margin. The margin is a component of the interest rate, so the plan is to transfer the loan to the bank with a lower interest rate. Your installment and interest will be lower, because you do not extend the loan period, you only lower the interest rate.

 

Do mortgage myths lead to wrong decisions?

 

Mortgage myths, in my opinion, make people take out loans from banks that are wrong and not suited to their situation. They often duplicate their friends' mistakes, trust information from them, although they themselves had to deal with only one loan. Incorrect credit decisions can generate losses of over PLN 100,000. For the average Kowalski, this amount is important. Hence the idea of ​​this post - I hope that I will be able to help you avoid costly decisions.


 

Feel free to comment. Is the topic of credit analysis interesting for you? Let me know in the comment. Will be happy to help clarify all issues. It is important to me that every topic regarding the mortgage is absolutely explained.

 

CONTACT ME >

Mortgage broker

Michal Kaplon

os.Stefana Batorego 80

60-687 Poznan

Strona www stworzona w kreatorze WebWave.