Mortgage offers in banks and advice: how to choose a good housing loan by comparing banks’ offers.
Certainly, choosing the right housing loan, it is necessary to pay attention to several parameters of the loan. Of these, the nominal interest rate of the loan, the installment system, the bank commission and the amount of the required own contribution should be mentioned.
The cheapest housing loan is not the loan, which has the lowest nominal interest rate, but the real one, that is APR. The amount of the actual Annual Interest Rate (abbreviation APR) is affected not only by the nominal interest rate, but also the commission and other additional fees that we will incur in connection with the loan granted by the bank. And this factor should be particularly taken into account.
Interest rate on a housing loan
Before we start looking at credit offers of banks in terms of nominal interest, it is worth knowing what affects its amount. The interest rate consists of two parameters :
- Gunyor 3M rates. It is the interest rate at which banks borrow money and its amount depends on the reference interest rate set by the Monetary Policy Council.
- margin determined by the bank.
The margin is a constant factor and does not change over the duration of the loan agreement (which does not mean that you can not sign an annex to the contract and change its amount), while the Gunyor rate changes. Do you know what to look for? Yes, the amount of the margin. How to choose a good housing loan, it is only with a low margin. Lower margin is a lower installment.
The system of installments in the repayment of a housing loan
The loan installment (each, not only in the case of mortgage loans) consists of a capital installment (repaid capital, i.e. debt) and interest installment (interest on the loan). In the case of equal installments, in the initial repayment period, the share of the capital part in the installment is lower, because we repay the interest primarily (the capital is relatively small). With each subsequent installment, the interest part will decrease and the capital part will grow, until finally the installment will consist primarily of the capital part.
In the case of decreasing installments, the installment consists of a fixed part of capital and interest. Interest decreases with each installment because the capital (liability) is reduced.
Which installment system is better? Fixed or decreasing installments ? In the case of decreasing installments, we will pay more interest, and additionally, it should be taken into account that at the beginning of the repayment the installments will be higher. What is the point of deciding for declining installments if, in general, the loan is more expensive? If we decide to have a housing loan for 20 or 30 years, at the age of forty, the repayment ends when we are already retired. And retirement benefits will certainly be smaller than your previous salary. And the same installments with each month approaching us to repay the loan will be a lesser burden on household finances.
Own contribution and housing loan
No own contribution, no move. You can not count on getting a housing loan. And it is not small at all, because currently the minimum own contribution is 20%. the total cost of buying a flat. The higher the own contribution, the lower the cost of the loan, of course. Well, if we are smaller than the required 20 percent? Own contribution can be reduced to 10 percent. But in this case, the bank will certainly require us, unfortunately, additional collateral.
How to choose a good housing loan, i.e. choose a bank
First of all, there is nothing to “catch the first better opportunity”. It is necessary to compare mortgage loans that we can do on our own (we already know what to look for). You can also make an appointment with a credit or financial adviser.
After examining our creditworthiness by the bank, we will receive an information form. It will contain the most important information about the loan, not in advertising folders. Each bank prepares this information individually tailored to our financial situation.
In addition, in the case of financial intermediaries, the information form will include the amount of the commission for the intermediary, if the loan is granted. But do not be afraid! It is not you who will pay this commission! The salary will pay the bank.
A loan broker does a lot of work for us and for the bank.
This is not only a comparison of loans, but also a number of other activities. The broker helps complete the necessary documentation, investigates initial creditworthiness and mediates in the conclusion of the contract. In fact, he leads his client from the beginning to the end.
Finally, the answer to the question is whether in the case of the selection of a housing loan in a specific bank, we are obliged to use other banking products. For example, the need to set up a bank account or choose a credit card? In other words: can the bank refuse to grant a loan if we do not use a specific additional product? No.
Currently, tying (cross-selling) is prohibited in this case. Banks offer housing loans without additional products. Of course, we can take advantage of additional products, because combined sales are not banned, but this does not affect the credit decision.