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The Warsaw Voice » Real Estate » February 23, 2010
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Mortgage Loans Back in Favor?
February 23, 2010   
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Banks are more willing to finance housing purchases again. A growing number of applications is being accepted, though the rules for granting loans have changed.

The crisis on the financial market caused a lot of communication noise between banks and borrowers. People planning to buy a home were disorientated and did not know who could lend them money and on what terms. Today banks are offering clearer information on what they offer and how they grant loans.

"We expect banks this year to grant mortgage loans worth up to 20 percent more than in 2009," says Halina Kochalska, an analyst at financial consulting company Gold Finance. "For banks the crisis was a time when they realized that mortgage loans were a safe product. Though compared with other types of loans the profit from them is small, this is more reliable income. Statistics show that people repaying mortgage loans behave exceptionally responsibly, and only about 1 percent of borrowers have repayment problems. When it comes to consumer loans, at some banks up to 20 percent of clients fail to repay these on time."

Bonus for the thrifty
Banks are lending to home buyers again, but that does not mean the terms are the same as they were before the fall of 2008.

"When the crisis began, most banks stopped granting loans for 100 percent of a home's value," says Arkadiusz Biernat, head of the Mobile Advisors Team at Money Expert SA. "The required downpayment was 20-35 percent, but as time passed, changes benefiting the client were made in this area as well."

Some banks have even returned to financing 100 percent of a project's value, which does not alter the fact that clients with downpayments are valued much more highly.

Gold Finance's Kochalska says, "In a bank's view, a client able to provide their own contribution not only assumes part of the risk but is also a more reliable partner because they have money. And that means they know how to save and are coping okay. Financial institutions have less confidence in people who don't save, and this is not surprising. A client's own contribution of 10-20 percent gives them a better negotiating position as a borrower."

Getting a loan depends on several factors. Apart from looking at the amount and regularity of your income and your fixed spending, banks will also investigate the condition of the company or sector where you work. "In the last quarter of last year, many people from the transport and finance sectors had problems obtaining a loan, as did people working for developers; self-employment is also looked down upon," Kochalska says.

Profit and risk
Evaluating the property as collateral is a separate issue. One of the first decisions banks made was to stop lending for a "hole in the ground." In late 2008, the risk became apparent that weaker developers would not be able to cope and would have to go under. That's why banks drew up lists of reliable developers and blacklists of companies for whose projects they refused to lend money. With time, many banks began offering loans only for completed homes or those that were at least 70-percent completed. According to Kochalska, "The problem is that appealing completed projects have already been sold. This means that now banks are starting to liberalize their policies in this area as well. However, there is still strong resistance to crediting a hole in the ground, as this not only spells risk but is also an unhealthy temptation for developers to delay the start of construction."

Analysts agree that clear and fair rules are needed in this area. If someone insists on buying a home in a project at the foundation-digging stage, they will be able to find a bank that agrees to give them a loan. However, they have to remember that they will have to meet certain terms and that they may not be getting a good deal.

While banks are less distrustful when they receive a mortgage application for a project that is 20 percent completed, in the case of unfinished projects developers are still subject to a selection process. Preference is being given to projects by larger, more stable companies that have already completed housing developments elsewhere.

"Buying an apartment at an early stage is riskier but also financially profitable because you can secure a better price from the developer," says Kochalska. "For example, an apartment in a completed building within the Miasteczko Wilanów development in Warsaw costs zl.8,000 per sq m, while a similar apartment in a neighboring building that is still just a hole in the ground can be had for just zl.6,000 per sq m."

Magdalena Fabijańczuk

Transaction Fees When Buying a Home

Marcin Jańczuk, Metrohouse real estate services company:
The transaction fee depends on factors such as the price of the apartment, the legal form of ownership, whether this is a new or pre-owned home, and whether or not you use a real estate agent. Buying with the help of a loan carries further costs.

The basic fees are the notary's fee, fees for copies of the notarial deed and court fees. For example, if a home's value is between zl.60,000 and zl.1 million, the maximum notary's fee will be zl.1,010 + 0.4 percent of the amount over zl.60,000 + VAT. In the case of apartments owned by people who are members of housing cooperatives, the fee is half that amount. Thus, if the property being sold is an apartment worth zl.500,000, the notary will charge a fee of zl.2,770 plus 22 percent VAT, or zl.3,379.40 in total. This is the maximum value, so you can try negotiating with the notary.

Apart from the above, you need to have the money to pay for official copies of the notarial deed, at zl.6 plus VAT, or zl.7.32 per page. Depending on the situation, a deed can have over 10 pages and the buyer will need several copies. The notary will also collect two or three court fees of zl.200: for entering the new owner in the real estate register and for entering the mortgage or mortgages in the real estate register when a mortgage loan is involved. The notary will also charge a fee for filing the entry applications. If mortgages are taken out, the tax on civil law transactions for establishing an ordinary mortgage is 0.1 percent of its value, and zl.19 for a capped mortgage. The payment at the notary's office must be made in cash.

You need to be prepared for more fees when buying a home on the resale market. Apart from the aforementioned fees, you will have to pay a tax on civil law transactions in the amount of 2 percent of the property's value. This must be paid in cash to the notary.

If you use a real estate agent, their fee usually ranges from 2.44 to 3.54 percent of the property's value. It is worth talking to the agent about their fee before you sign a contract with them.
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