Are you scared of a mortgage? Learn what to pay attention to and ensure your financial security.

Are you wondering how to safely finance the purchase of real estate? A mortgage is a long-term commitment that requires careful consideration. Anyone planning to take out a loan for an apartment or house construction should thoroughly analyze the terms of the agreement to avoid unpleasant surprises. If you are in the process of taking out your first mortgage, we will show you what to pay special attention to, ensuring that this decision is fully beneficial for you.

Key Aspects of a Mortgage You Must Pay Attention To

Taking out a mortgage is a long-term and costly commitment, so it’s essential to approach bank offers with a clear head, resisting the temptation of initial promotions. It is crucial to thoroughly analyze the loan conditions before making a decision. Being aware of what to look for when choosing a mortgage will enable you to objectively assess the bank's proposals and select the most favorable one.

To assist you in this process, we have prepared a list of key loan parameters that will help you better understand bank offers. This way, you will be better prepared for your first meeting at the bank and for using free tools, such as a mortgage calculator or a creditworthiness calculator. Here’s a list of elements to verify:

• bank requirements regarding creditworthiness
• minimum amount of own contribution
• interest rate on the loan
• APR (Annual Percentage Rate), costs of bank commission
• repayment period
• contract details
• insurance costs

In the context of the above list, special attention should be paid to the APR (Annual Percentage Rate). This parameter allows for a precise assessment of the total cost of a mortgage. It includes not only the interest itself but also bank fees, insurance costs, and other additional charges that can easily be overlooked with large loan amounts.

Therefore, experts in the mortgage industry indicate that comparing mortgage loans is most effective when attention is paid to the APR.

How much equity is currently needed?

Equity is a key element in the mortgage application process. According to the guidelines of the Financial Supervision Authority (Recommendation S), it should amount to 20% of the loan value. However, banks often cater to customer needs, allowing for half of that amount to be secured in an alternative way.

Considering the current state of the housing market, it's challenging to find a loan offer completely free of the equity requirement. Therefore, it's worth checking the minimum amount expected by the financial institution you choose.

Mortgage loan – is it better to take equal or decreasing installments?

The bank offers two types of loan installments: equal (also called fixed) and decreasing. Equal installments remain at a constant level throughout the loan repayment period. At the beginning, a larger part of the installment consists of interest, while the capital share is minimal.

When choosing decreasing installments, you repay a larger portion of the capital in the initial phase, and interest is calculated on the decreasing loan amount. In this case, the first installments are higher than subsequent ones, meaning a higher credit capacity is required.

If your financial situation allows it, it is worth considering whether decreasing or equal installments are a better solution. Decreasing installments often prove to be more cost-effective in terms of total loan costs.

Fixed or variable interest rate?

The interest rate on a mortgage can be fixed or variable, which directly affects the amount of monthly installments and the overall cost of the loan. The decision regarding the type of interest rate depends on the borrower's preferences and their willingness to take on the risks associated with fluctuations in interest rates. Below is information about both types of interest rates:

• Fixed interest rate - unchanged for a specified period, e.g., 5 years (provides stability in payments, making it easier to plan a household budget);
• Variable interest rate - reacts to changes in market interest rates (can lead to an increase or decrease in payment amounts);
• Advantages of fixed interest rates - protection against sharp increases in interest rates, ensuring long-term financial stability;
• Advantages of variable interest rates - may initially be lower than fixed interest rates, allowing for more favorable monthly payments;
• Risks of fixed interest rates - there is a risk that the accumulated increase or decrease in the reference rate will lead to an increase in mortgage payments;
• Risks of variable interest rates - possible sudden increase in mortgage payments in the event of interest rate hikes, which can negatively impact the household budget.

The choice between fixed and variable interest rates should consider your ability to manage risk and expectations regarding financial stability.

Mortgage Agreement – Key Issues You Need to Check

The loan agreement is a crucial document that defines the terms of the mortgage loan and your rights and obligations as a borrower. Before you decide to sign it, it is essential to thoroughly review its content.

What should you pay attention to when analyzing a mortgage loan agreement? Focus on the following aspects:

• Amount of the loan, repayment period, and all fees related to the loan costs
• Terms and conditions for loan disbursement
• Loan collateral;Rules for repaying the obligation
• Possibility of changing the payment date of installments
• Availability of loan holidays and options for early repayment of the loan
• Provisions regarding potential changes to the credit conditions
• Rules for withdrawing from the contract and its termination by both parties

Don't hesitate to ask questions when entering into a loan agreement. It's best to clarify any doubts immediately with the bank advisor.

From our article, you already know, among other things, how to compare mortgage loans. Buying an apartment with a loan is a complex process that requires dealing with many formalities. It starts with finding the right property, thoroughly verifying it, and then signing a preliminary agreement and submitting a loan application along with the necessary documentation. In the first aspect, we can certainly help. Ronson Development offers, among other things, new apartments in Szczecin, which stand out for their proximity to green areas. We warmly invite you to check out our apartment offerings.