Taking out a mortgage requires an own contribution. Banks are no longer ready, except in unusual situations, to finance the entire investment. The minimum amount you need to commit is 10 percent. property values.
The own contribution requirements are the result of the recommendations of the Polish Financial Supervision Authority. The minimum own contribution is currently 20 percent. the value of the property being financed, but half of this amount can also be borrowed from the bank, subject to additional collateral. The decision is therefore for the lenders. Some of them use the gate left by the SDR, and some use a more conservative approach.
Issue of minimum own contribution
The diversified approach of banks to the issue of minimum own contribution has significant consequences for potential borrowers. First of all, if you decide to commit with a 10% contribution, the list of lenders will be shorter than with the involvement of significant savings.
Secondly, loans at 90 percent. property values are usually more expensive than those with twice the customer’s payment. The difference is due to the higher credit margin and, in some cases, the additional costs of insuring a low own contribution. The cost of such collateral is covered until the ratio of debt to property value does not fall below the 80% threshold.
Therefore, if we take a loan to buy a flat costing 300 thousand. PLN, we will have to cover at least PLN 30,000 from our own Cashieca. The rest can be financed with a loan. However, your own contribution does not have to be only cash, there are other options depending on the assets we have and the type of liability.
Take out a housing loan
If we collected savings in the so-called Third pillar pension (on IKE or IKZE), the bank may treat them as own contribution to the mortgage. A pledge of a certain amount is established. The PFSA recommends that in the agreement, the bank consents to the access to funds to its owner when the conditions provided for in the act are met (e.g. reaching the threshold age), if we allocate money to pay the liability. This solution has an important advantage – we can still accumulate reserves for retirement and benefit from the related profits (e.g. reduction of PIT tax in the case of IKZE), and at the same time we get a chance to take out a housing loan.
Own contribution may also be an advance paid to the developer when we buy an apartment on the primary market. In the case of a purchase on the secondary market, the same will be the advance or down payment paid to the seller of the premises used.
In the case of loans for house construction, it will be the value of the plot, construction costs incurred, including the costs of preparing the investment (construction project, utilities). The value of the plot will be estimated based on the market price, and other costs must be documented. For this reason, it is worth taking care of invoices for building materials, invoices for performed works and all confirmations indicating that we have actually engaged financially in the already started construction.