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The expert chooses the best mortgage for himself

There is no perfect bank for everyone. Everyone has a unique financial, personal and real estate situation. Everyone has their own budget and plans for a mortgage. Describing what loan I would choose, I will not shoot myself into the situation of each person. For me, the best mortgage should have certain features. The mortgage is not fully quantifiable. I have already criticized all sorts of rankings and comparison websites on the blog. A mortgage loan, apart from the amount of the installment and commission, is more or less comfortable on certain issues. When you choose 3-4 of the best deals, you will see that the cost differences are not great. So everything is played out in detail. In today's article, "The credit expert chooses the best mortgage for him," I will discuss the following issues:

do I look at the overall cost of the loan,
why do I consider the RRSO to be an incorrect indicator,
which would be most important to me: margin, commission or additional products,
Does the bank where I have my account offer the best pricing conditions?

1. Mortgage availability

The first and most important feature of all is accessibility. It does not matter that a bank is in the first place in some ranking. Even assuming that the ranking was made quite objectively, it might turn out that only a few offers would be available to me. Therefore, I would not be tempted by this or that institution just because it shines on the credit podium. I would be interested in offers that would be feasible in my situation.

2. Mortgage rankings

Check the best mortgage in 3 minutes. Sounds great - doesn't it? A mortgage is very difficult and the rankings do everything for us. Unfortunately, this is a mirage. It is not possible to create a universal ranking that would actually show the best price conditions for all interested parties. Most rankings on the Internet are not updated on a regular basis. Their structure is very simple: installment and interest expense. There are not all the important issues that I take into account when choosing a loan for clients.

3. Loan period

In my opinion, the loan period should be carefully selected according to the income and budget. The loan installment should not exceed 30% of the income obtained. Therefore, you should carefully calculate your monthly salary and choose the amount of the installment. The maximum loan term that is allowed is 35 years. The installment is actually at a relatively low level for many people. Nevertheless, such a loan period generates very high interest. For some of us, it also means living with a loan until retirement, which is not a very interesting perspective anymore. Therefore, I encourage you to shorten the loan period. The shorter the better, but with the appropriate financial cushion.

4. Margin or commission, which is more important?

There are two credit strategies. One that says that the lowest overall cost of the loan is the most important. Most often, this type of offer requires a higher initial cost in the form of a commission. The second option is to reduce startup costs, offer with very good early repayment conditions and use these opportunities. For me, the best mortgage should combine zero startup costs with good margin conditions and great early repayment conditions.

5. RRSO

The RRSO is a very average indicator for choosing a mortgage. So why do brokers and banks have to include this value in advertising, offers, information forms, loan decisions and contracts? This is what the legislator decided. The RRSO does not take into account all important loan components, such as early repayment, the comfort of having such and not other additional products or the loan refinancing potential. The RRSO for a decreasing installment will be higher with the same loan arrangement than in the case of an equal installment. The RRSO for a shorter period, unfortunately, gives a higher result than for a loan taken out for more years. How is it possible that the RRSO is higher for a cheaper loan? The formula for calculating the RRSO is simply flawed. It may be a clue there, but not an oracle.

6 .Early repayment

As many as 90% of people at the stage of applying for a loan passionately ask for early repayment. Then 90% of all these people do not use it at all. An overpayment made even with small amounts will result in very large savings in the long term. Depending on the length of the loan and the interest rate, thanks to the overpayment of PLN 1,000, you can save up to PLN 2,000 on the lower total cost of the loan. Therefore, I personally would choose a bank with 0% early repayment, the possibility of making it through electronic banking and the possibility of making a free decision whether the loan period should be shortened after the overpayment or the installment lower. That would be an ideal early repayment.

7. Additional products for a mortgage loan

I don't like compulsions. I believe that the fewer responsibilities the better. Sometimes, even at the expense of a slightly higher loan installment, I would choose an offer without cross-selling. I am able to accept a compulsory receipt bill, perhaps life insurance at some reasonable price. I would like to choose property insurance on my own, and I simply do not like credit cards.

8. Equal installment or decreasing installment

The decreasing installment allows you to reduce the interest on the loan. It is characterized by a much higher value at the beginning of the loan period than an equal installment. The principal amount is divided into the number of months, while the interest gradually decreases. In my opinion, however, it is better to take out a loan in equal installments, for a shorter period. The amount of interest will be lower, the capital will increase with each installment, and the loan period will be shorter. However, it is worth considering the issue of the borrower's age here. My solution is good for people aged 20-40 who have the potential to increase their salary or keep their income stable. For people over 45, it may be better to think about decreasing installments due to the potential decrease in vitality or income.

9.Bank loan where I have my account

Many people think that the bank where they have an account will offer the best price terms. Unfortunately, there is no such rule in any institution. Yes, there are small loyalty discounts in 2-3 banks, but they do not make the offers the best. Let's say they become acceptable. Rather, it is one of the many simple marketing ploys used by banks. When looking for a loan offer, you need to get acquainted with all banks or use cooperation with an intermediary. You cannot stop at your bank.

10. Potential loan refinancing

The pricing terms of the loan are an eternal sine wave. Every few years, there are changes for better and worse. I believe that planning and repaying a loan with one bank until the end of its term for 20-30 years is a wrong assumption. Depending on the moment of taking out the loan, each of us will have a chance to improve our situation several times over the course of 20–30 years. Refinancing is the transfer of a loan from one bank to another in order to improve the pricing conditions. In countries where mortgage financing is much more established, refinancing covers more than 30% of the market. As of today, it is less than 5%. Therefore, when taking out a loan, I look at the refinancing potential in the future. I reject loan offers with high startup costs and poor early repayment conditions. This is especially important at times when loan offers are characterized by high margins, as is the case today.

11. Bridging insurance

Bridging insurance is an increased margin until an entry is made in the mortgage. The bank will collect such an amount from the payment of the loan, through the notarial deed, until the land and mortgage register is established and an entry is made for the bank in section IV. In the primary market, the period of collecting funds may last up to 36 months. The cost may be several thousand zlotys. A large amount for bank insurance in case there are problems with the entry of the mortgage. It does not play such a big role on the secondary market. If I had an unencumbered condo, I would consider encumbering this property to keep costs down. The condition is that the real estate purchased should constitute at most 90% of the value to be encumbered.

12. What bank do I have a loan at and why did I choose this particular bank?

I took out my loan from BNP Paribas (formerly BGŻ BNP Paribas) on November 21, 2012. It was the end of the loans with subsidies in the Rodzina na Swoim program. This co-financing consisted in the payment of up to 50% of the interest value for 8 years. In my case, it will be over PLN 40,000 over 8 years. Pretty good. It was also the last year without the need to involve own resources. BNP Paribas was one of the few banks that did not charge a fee for low deposit insurance. The margin on my loan is 0.99% and the commission is 2%. At that time, these were fantastic conditions. Today they look almost cosmic. The big downside is poor electronic banking and poor early repayment conditions. When I took a loan, it was the best loan option for me.

Summary

The best mortgage is a relative term. Each of the borrowers has their own habits, philosophy of life, financial needs or personal situation. The selection of the loan should be made consciously, taking into account all variables. An unbeatable mortgage is a big challenge. I definitely do not recommend using the rankings. A mortgage is a choice for years, a kind of bet with a future, if I have planned everything correctly. Try to look around in your community to see if someone in your family or friends can recommend a trustworthy mortgage expert. If not, please contact me. I serve clients from all over Poland. You can read my story here, testimonials here, and the showcase is the entire blog you found.

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.