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Mortgage what to look for in 2022?

While in the case of cash loans, when making decisions, it is often convenience and the lack of formalities that counts, in the case of a long-term mortgage loan, we pay attention to all elements of the loan. We also take decisions longer and look at the offer much more closely. We also often use the help of a credit expert. This is a very correct attitude because we are making a very serious credit obligation that we will pay back over the years. In this article, we'll tell you what to look for when applying for a mortgage.

Mortgage - what should you know?

Before signing a mortgage contract, carefully analyze its terms. Do it meticulously and without emotion. We know that you want to live in your apartment very much, but a mortgage is too expensive a commitment to make a decision without a thorough analysis of the loan elements and provisions in the contract. Banks tempt with promotions because they want to attract customers. However, the promotional offer is not always the best one. That is why we want to tell you what to look for in order to choose the best mortgage. Especially for you, we have prepared a list of the most important parameters of a mortgage loan. Once you've read the article, you'll be well prepared to talk about a mortgage.

Mortgage - we list the most important parameters

A client who does not deal with finances on a daily basis will not always know what to pay attention to. We present below the parameters that you should check before signing a mortgage contract. They are as follows:

what is the minimum amount of own contribution,
what is the interest rate on the loan,
the amount of the RRSO, i.e. what is the actual cost of the loan,
the amount of the bank commission,
duration of the commitment,
insurance amount,
your rights and obligations,
a method of examining creditworthiness by the bank.

Mortgage loan and creditworthiness and creditworthiness

What does it depend on if you get a mortgage? When making a decision, the bank will be guided primarily by your creditworthiness. Creditworthiness, in other words, is the ability to pay off the loan in accordance with the terms and conditions specified in the loan agreement and in accordance with the attached schedule. Each bank has its own credit policy and risk management policy, therefore the criteria for assessing creditworthiness may differ. Usually, the bank does not share information regarding the creditworthiness test procedure. Even if one bank rejects your application, do not give up applying for a loan. You can apply to another bank where you will receive a mortgage.

Mortgage and own contribution

What is certain is that you will not get a mortgage without your own contribution. Own contribution is necessary to apply for such a loan. The Polish Financial Supervision Authority issued recommendation S. According to this recommendation, the own contribution should amount to 20% of the loan value. What if you don't have such a large amount? Then you have the option of taking advantage of the low own contribution insurance. There are currently no offers without the required own contribution. However, check what is the minimum own contribution at the bank where you want to borrow money.

Mortgage - equal or decreasing installments?

During the presentation of offers, the bank advisor may offer you to repay the loan in equal or decreasing installments. Equal installments, otherwise known as fixed installments, do not change throughout the loan repayment period, unless the interest rates change. At the very beginning, the major part of the installment is interest, only later does the capital part dominate. However, in the case of decreasing installments, you immediately pay off a large part of the capital. This means that at the very beginning the installments are very high and will decrease over time. Obviously, it is more difficult to get a mortgage with a decreasing installment, as it requires a lot of creditworthiness. When you can afford decreasing installments and repayment will not be a problem for you, check which option will be more favorable for you. Certainly, however, a loan with decreasing installments is associated with lower total costs of the mortgage.

Mortgage rate

The mortgage rate is one of the parameters that determines the cost of the mortgage. Based on the interest rate, the amount of interest is calculated and returned to the bank along with your capital. The interest rate consists of the WIBOR (R) reference rate and the bank's margin. The bank's margin is its profit.

The total cost of the mortgage

However, it is not the interest rate that is the most important element of the mortgage. If you want to know the total cost of the loan, check the RRSO first. The RRSO is the Actual Annual Interest Rate. Apart from interest, the RRSO also includes the bank's commission, insurance and other costs. The RRSO is the most accurate cost component of a mortgage loan. The lower the RRSO, the lower the cost of the mortgage will be. When comparing bank offers with each other, filter them primarily in terms of RRSO. Thanks to this, you will find out which offer is the most advantageous in terms of price.

Mortgage - loan period

Typically, the maximum loan term is between 25 and 30 years. Check what is the maximum loan period at the financial institution of your choice. With a lower creditworthiness, the bank will propose the longest possible loan period. Thanks to this, you will pay the installments that you can afford. Sometimes it is also worth choosing a long loan period, even if you can pay high installments. You can always pay off such a loan earlier. However, a low installment reduces the risk that in the event of unforeseen circumstances it will be easier for you to pay it back. Also check on what terms you can pay off the loan earlier.

Commission for granting a mortgage

The bank usually charges a commission for granting a mortgage. This is an additional, apart from the margin, the bank's profit from granting a mortgage. Some banks, in order to attract customers, sometimes give up charging commissions. The commission has a large impact on the APRC, i.e. the total cost of the loan. Therefore, it is worth negotiating with the bank the amount of commission for granting a mortgage. The commission amount is on average 3% of the loan value. However, you can find a mortgage with a 1% commission or no commission at all. Sometimes, when a bank offers a loan with a low interest rate, then you can expect a higher commission.

Mortgage insurance

Banks also require their borrowers to take out appropriate insurance. In principle, there are no longer any mortgage loans without insurance. First, however, banks require different amounts of insurance, and secondly, you can find insurance on your own. The bank cannot force you to buy an offer through it. You can choose any insurer, as long as it offers a coverage that is acceptable to the bank. The bank often encourages customers to buy the insurance it offers. They then offer lower mortgage costs. Check the terms and conditions of the insurance well, because the range of insurance offers ranges from several to over a dozen percent of the amount borrowed. These can be really big differences.

Mortgage application

One of the basic conditions for obtaining a mortgage is submitting a correctly completed application with attachments to the bank. Only then can the bank start the loan granting procedure. Each financial institution has its own templates of applications and documents. They differ in content and form. Before you start filling out the applications, check what information you will need. You may have to obtain some of them ex officio or, for example, in court. Remember that only a correctly completed application will be accepted by the bank. You can contact a credit expert for help in completing the application.

Mortgage agreement

When the bank agrees to grant a mortgage, it is time to sign the contract. You always have the option to negotiate the terms of the contract. The most important thing, however, is to read the contract carefully and familiarize yourself with its provisions. If you do not understand any provision, ask your bank advisor or your credit expert. Sign the contract only when it is completely understandable to you. What to look for when reading a mortgage contract? We advise:

whether the correct data has been entered,
loan amount and currency,
the purpose of the loan,
loan repayment rules and schedule,
interest rate,
loan collateral,
what is the bank's control regarding the use of funds from the loan,
the amount of the commission,
conditions for making changes and terminating the loan agreement.

Additional mortgage fees

Most often, bank advisers do not mention additional fees during the first discussions. However, you should know that you will unfortunately have to bear additional costs. Other mortgage-related fees include:

court fee related to establishing a mortgage,
notary fee for the preparation of a real estate sale deed,
fees for opening a personal account or using a credit card,
costs of an appraiser who will prepare an appraisal report,
fees for the preparation of annexes to the contract,
cost of issuing a promise of credit.

Early mortgage repayment

The bank cannot forbid you to pay off your mortgage earlier. However, some banks will charge you a commission if you want to pay off the loan before 3 years have passed from the date of signing the contract. This will be an extra fee for you. How does it look in practice? When you want to pay off the loan in the first year from signing the contract, you will pay a 3% commission, 2% in the second and 1% in the third. Under the law, the bank cannot charge a commission if the loan is fully repaid three years after signing the contract.

Mortgage - important non-financial aspects

When deciding to cooperate with a given bank, check not only the costs of the mortgage, but also non-financial aspects. The most important issues are:
Attachments to the mortgage application - When you apply for a mortgage, you need to provide a lot of documents. Some of them have a specific expiry date, so submit them as soon as possible to avoid running around the offices again. You will not avoid formalities, especially when taking out a mortgage, but you can check which bank suits clients in this matter.
Fast decision-making by the bank - Waiting for a bank's loan decision is usually long and takes a long time. According to the regulations, the bank has no more than 21 days to make a decision. Of course, it all depends on whether you provide all the required documents on time. Before signing a contract with a given bank, find out from other borrowers how long they had to wait for a loan decision or for the payment of subsequent installments.
Professionalism of bank employees - Banks, as institutions of public trust, should provide the highest level of service. You have the right to demand information and help in any matter. Check how the bank employees help you with the loan, completing documents, and whether they are willing to provide you with the necessary information. The competences of bank advisers and their personal culture are extremely important.
Additional credit products - Promotional mortgage offers are often closely related to cross-selling. Customers wishing to take advantage of the promotion must purchase an additional bank product. It can be a personal account, savings account or credit card. You should decide for yourself whether such a transaction will be profitable for you. It is also bound by certain conditions. For example, when you give up your credit card during the mortgage contract, the bank may increase your interest rate.

Remember that if you have any doubts, I am happy to offer you advice and assistance. Let's meet, you will find that my help in choosing the best mortgage can be invaluable.

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.

Mortgage what to look for in 2022 ?