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Premium loan - what does it mean?

A premium loan is associated with something unique above all. How, however, is such a definition to be briefly defined? Simply put, it is a loan for people referred to as a premium customer in banks. What exactly is characterized by such a customer segment?

What can you learn from the article?

What is a premium loan?
What are the criteria at banks for a premium loan?
What are the biggest challenges in getting a premium loan?
How to prepare to apply for a premium loan?
What mistakes should you avoid when applying for a premium loan?

1.Premium loan - what is it?

A premium loan is a term such as a grant for the purchase of a higher-standard house or apartment. Such properties are flats over PLN 1 million and houses over PLN 2.5 million. A premium loan, in turn, should meet the criteria of a loan with a volume of PLN 1 million. Each month, several dozen of such loans are granted in Warsaw. This is not a very high number, so maybe that is why banks still have not developed processes for such transactions?

For banks, premium loan unfortunately means one more thing. According to most banking procedures, such a transaction is considered a higher risk transaction. Why? One outstanding loan for PLN 2 million has a greater impact on credit risk than five transactions of PLN 400 thousand each. zlotys. It does not matter here that the client is the affluent segment, as this is how the bank treats banking risk. To sum up, a premium loan for the purchase of luxury real estate is available on the market. You can get it, but it is worth remembering that banks look especially carefully at this type of loan application. It is therefore necessary to properly prepare for such a loan process so that we will not be refused a mortgage.

2.Premium loan - how to prepare a real estate appraisal?

Property valuation is the first challenge for bankers when it comes to premium loans. Banks make the mistake of valuing superior properties through the comparative method. It consists in comparing properties of a similar size from the area, without taking into account the finish, materials used, architectural concept, and the uniqueness itself, which plays a huge role in the premium market.

3.Premium loan and own contribution required

Own contribution to a mortgage loan is another challenge for banks in terms of loans with a volume of more than PLN 1 million. Therefore, banks expect the highest possible own contribution, preferably at the level of 40%. I must admit that premium customers very often have one. However, there are cases when clients do not want to engage their own funds, thus wanting to use the financial leverage, and then problems begin. As a rule, the customers are right. As of today, in Poland (February 2018) you can still take out a mortgage with a 10% own contribution. So what are the banks afraid of? Bankers are afraid that this type of property will be difficult to sell in the event of possible enforcement, i.e. the collapse of the loan and the forced sale of the property.

This banking doubt, however, is not in line with reality. This argument shows another problem highlighted by banks. Today in Poland we have a situation where there are a lot of people willing to buy real estate, and still few apartments and houses at a favorable price. So if banks developed a real estate sale system by outsourcing to the best premium real estate offices in Poland, the problem would be solved by itself. Another thing is that the percentage of unregulated credit transactions is very low in our country.

4.What mistakes to avoid when applying for a premium loan?

If the client is a foreigner, you can talk about a permanent check-list, the most important points of which are listed above. If, on the other hand, the customer is a Pole, the weakest point of the credit transaction may be the preparation of the loan application itself. In my experience, premium customers are usually limited liability company owners. They receive remuneration in very different ways: contracts for specific work, appointment as a board member or employment contract for the president of the company. Often they also own shares in other companies. Therefore, you should admit everything before the bank and present not only your own source of earnings, but also document the financial condition of the companies in which the client has shares through the Balance Sheet and P&L.

5.Premium loan - Credit expert or bank?

The answer is simple. Banks with a premium loan password have enormous difficulties. A credit broker, provided he has the appropriate experience and knowledge, will be able to help you. Today, credit intermediation is based on a document such as the Mortgage Act. Therefore, it is a very safe form of cooperation for the client and guarantees him the opportunity to talk to many banks at the same time. This is a free service for the customer as it is the banks that reward the credit advisors.

Premium loan - Summary

Premium credit is your goal as well as ours. Thanks to obtaining such a loan for you, we know that you will recommend us. For this to happen, make an appointment and come to our office. You will see what you read today - offers tailored to your needs and expectations. If you want to learn more about this type of loans, visit our Private Banking page.

It is imperative that your loan broker be familiar with this real estate segment as it is specific. If you want to understand what exactly I mean, you can check out our other article in which I present the premium real estate market. We have the comfort that, apart from credit intermediation, we also provide real estate brokerage in the premium market segment, hence our knowledge is greater than that of bank employees.

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.