How to choose a loan for the purchase of an apartment wisely?
Choosing the right loan is a very important decision – a mortgage is a commitment, which usually ties you in for years (sometimes even 30).
How to decide which offer to choose? An answer to this question will be provided by professionals from the Mortgage Department at Ronson Development.
Instalments adapted to the capabilities of your budget
Any decision concerning choosing the appropriate loan offer should be preceded by an analysis of the client’s needs and an identification of the capabilities of your budget. Therefore, the first step is to determine the amount lacking to purchase the property. It is also worth remembering to allocate some funds for fitting out the apartment. When analysing your budget, you should take into account the amount of monthly inflow from salaries as well as fixed monthly expenses. On this basis, you can specify the maximum loan instalment which you are able to bear. It should not exceed 35% of your monthly net income.
Price of the mortgage
An important factor to consider when choosing the loan is interest rate. It consists of:
1) the WIBOR rate, which may change during the loan repayment period. WIBOR shows at what price the bank borrows money from other banks.
2) margin, this is the profit of the bank, which is a regular part of the loan price. It is worth checking whether the fixed amount of the margin will apply throughout the loan period.
You already know that the interest rate on the loan consists of a variable WIBOR rate and a fixed margin. How does it work in practice?
Example: let us suppose that WIBOR is 1.7% and the bank margin has been fixed at a level of 1.6%. Therefore, the total amount of interest will be 3.4% and the monthly loan instalment in the amount of PLN 200,000 incurred for 30 years and repaid in equal instalments will be PLN 887. Assuming that WIBOR will not change, the total interest would amount to PLN 119,306.
Additions to the loan
Also, an important element when choosing the offer are fees, commissions and the costs of additional products. Banks can try to tempt you with a low margin, whilst trying to sell you other products. This technique is called ‘cross-selling’. You may, for example, be encouraged to open a bank account with a credit or debit card. It is important to remain vigilant – failure to comply with the terms and conditions imposed by using additional products may cause irreversible changes in the terms and conditions of your loan agreement.
When choosing a specific offer, you should also seek information on possible measures to be taken in unforeseen situations, such as job loss or health problems, as they can affect your temporary financial position. Thus, it may be worth making sure that the terms and conditions of the loan provide the right to a so-called ‘grace period’, i.e. temporary exemption from paying the instalments.
If you have any doubts or additional questions, please contact a specialist from the Mortgage Department at Ronson Development.