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23
Jun
How to prepare for the mortgage process
Purchasing a property is one of the most significant events in most people’s lives. Deciding to take out a mortgage involves a long-term financial commitment, so it is crucial to prepare thoroughly. Below, we outline step-by-step how to prepare for a mortgage in Poland.
Assess Your Financial Situation
Income and Expenses
Before considering a mortgage, analyze your finances thoroughly. Make a list of your monthly income and expenses, including all fixed commitments such as rent, bills, subscriptions, and other loans.
Credit History
Check your credit history before applying for a loan.
Banks assess creditworthiness based on the history of repaying previous obligations. You can do this by obtaining a report from a credit bureau Biuro Informacji Kredytowej – BIK (www.bik.pl). Ensure you have no arrears or negative entries. IMPORTANT – foreigners have to wait up to 14 days for BIK report due to lack of fast verification options so order the report at the beginning of preparation for the acquisition and loan process. It is also worth reaching for the report if you have no credit obligations in the past, as the BIK report includes an additional BIG Infomonitor section that shows any unpaid bills to companies that have not yet been closed and may prevent you from receiving a positive decision from the bank.
From the experience of our clients, we know that you may not know that you have a negative hisotria in BIK or BIG Infomonitor so it is particularly important to check everything before deciding to buy a property and commit your own savings.
Remember – we represent your interests in the transaction and your financial security is our top priority.
2. Savings for a Down Payment
The down payment is the portion of the property’s value that you must cover with your own funds. It typically ranges from 10% to 20% of the property’s value. The larger the down payment, the better the terms you can secure. Start saving for this goal as early as possible.
3. Understanding the Costs Associated with a Mortgage
Interest Rates
Mortgage interest rates can be fixed or variable. A fixed interest rate provides certainty about the installment amounts throughout the loan period, while a variable rate can change depending on market conditions.
Fees and Charges
Familiarize yourself with the fees and additional charges that may arise when taking out a mortgage, such as the loan origination fee, notary fees, insurance costs, and potential prepayment penalties.
4. Choosing a Property
Location
Choosing the location is a crucial element when buying a property. Consider whether you prefer to live in the city center, the suburbs, or a quiet rural area. The location affects not only your quality of life but also the property’s future value.
Condition of the Property
Assess the property’s condition. Investing in a professional inspection is worthwhile to avoid unexpected repair costs.
5. Selecting a Mortgage Offer
Compare mortgage offers from different lenders. Look at the interest rates, terms, fees, and any special conditions. Good mortgage advisor will help you to estimate monthly payments and total costs over the life of the loan, list additional products and their effect on the total cost.
Pre-Approval
Consider getting pre-approved for a mortgage. Pre-approval gives you a clear idea of how much you can borrow and shows sellers that you are a serious buyer. Some banks allow to apply before signing the preliminary contract with the seller/developer. That way you can get financial decision with confirmation of your credit capacity for the loan. Important – later term indicted in the contract with the seller/developer have to be the same as established in the bank application.
6. Final Preparations
Documentation
Gather all necessary documents, such as proof of income, bank statements, tax returns, and identification. Having these ready will streamline the application process.
Financial Reserve – own (cash) contribution
Ensure you have a financial cushion for unexpected expenses or changes in your financial situation. This will provide security and prevent financial strain. Currently banks require 10% of total investment amount (acquisition price + renovations/finishing works) own contribution. 20% is preferable as it opens you to additional banks and cheaper offers.
Conclusion
Preparing for a mortgage requires careful planning and consideration of various factors. By assessing your financial situation, saving for a down payment, understanding the costs involved, choosing the right property, and comparing mortgage offers, you can make an informed decision and secure a mortgage that best fits your needs. Taking these steps will help you navigate the process smoothly and set you on the path to homeownership with confidence.
If you would like to find out more, please contact us. We will also help you at every stage of the process. We will help you to check your credit report and validate maximum amount of credit available for you in Polish banks.
We remain at your disposal
+ 48 71 707 00 26
info@polassets.com
