A Mortgage Loan – What You Should Know About this Loan


If we think about borrowing more money, then the mortgage loan will definitely be the most advantageous solution. Provided that we have a property in the form of a house or flat.

A mortgage loan is a favorable and popular form of crediting, secured by a mortgage on real estate with a land and mortgage register. We do not find loans for a cheaper product, maybe with the exception of a mortgage loan, but the main difference between a mortgage loan and a mortgage loan is that we can only use a mortgage for the construction, purchase or renovation of real estate. However, in the case of a mortgage loan, the borrower has full freedom to use it.

We can devote a mortgage loan to either buy a car, buy equipment for home, vacation or any other purpose. Often, borrowers use the funds obtained as part of a mortgage loan to consolidate other, much more expensive loans. This is because mortgage loans are rather low-interest, compared to other loan products, such as consumer loans or consolidation loans, the interest rate on the mortgage loan (about 7%) is three times lower.

Mortgage loan – the cheapest method of financing?

Mortgage loan - the cheapest method of financing?

A mortgage loan is definitely the cheapest loan for any expenses. Installment in the case of a mortgage loan is even by half lower than the installment of a cash loan. People who need money often do not take the mortgage option into account. They do not remember that there is such a possibility, and yet a mortgage loan is the best idea to borrow a larger amount of money from the bank without translating, for which we need this money. Recommendation T in 2011 introduced restrictions on the calculation of the creditworthiness of borrowers applying for mortgage loans. According to the recommendations, the credit burden of people whose earnings are lower than the national average can not be higher than half of the income. The more affluent individuals may spend up to 65% of net income on credit commitments. The effect of these recommendations is that many people simply do not have credit worthiness at the moment. However, those who have creditworthiness, it turns out that it is still too low. A mortgage loan allows you to consolidate existing loans and pay lower installments. Savings in the case of a mortgage loan are much larger than in the case of a consolidation loan.

Real estate loan

Real estate loan

The basic requirement that must be met to obtain a mortgage is to have a property that we will be able to pledge in the bank. A real estate can be a house, flat, plot. The real estate must have an unpaid mortgage. Rather, banks do not agree to the next entry in the mortgage, unless their entry is listed first in the land and mortgage register. Secondly, when applying for a mortgage, we must be aware that we will not get a loan for the entire value of our property. Banks borrow from 50 to a maximum of 80% of the property price. Different banks approach the minimum loan amount differently. Most often, however, banks grant mortgage loans of 20,000. zł.

As for the interest rate, mortgage loans have only 1-2 points. percent. higher interest rates than home loans. In this way, we can borrow money from the bank at 8-10% per annum. This is an interest rate much lower than in the case of cash loans. Apart from the low interest rate, the mortgage loan also creates the possibility of repayment for a long period of time, typically 20-25 years.  Banks, however, set conditions for the age of borrowers, they wish to complete the repayment period before 70-75 years of age.

It is worth noting that a long repayment period is certainly a comfortable solution. Even if we take out a short-term mortgage loan and unexpected financial problems arise, we can always apply for an extension of the repayment period, and hence a lowering of the installment. Cash loans and installment loans do not offer such opportunities. A car loan can also be repaid for a maximum of 10 years. The account loan is an annual renewal of the contract.

Does the mortgage loan have any drawbacks?

Does the mortgage loan have any drawbacks?

The mortgage loan has some drawbacks. It is necessary, as we already know, real estate, but also we are expecting expenses that we do not have taking consumer loans. So here we have a variable commission, mandatory insurance, insurance of the missing contribution on time for the entry of the mortgage into the land and mortgage register. At Bank Millenial, we have about PLN 83 of these costs monthly, and PLN 65 at Credit Bank. You also need to spend about 100 zlotys to set up a mortgage by the bank, 200 zlotys to enter a mortgage, sometimes we also bear the costs of a notary’s fee. Sometimes, you have to pay several hundred zlotys for the valuation of real estate. The initial costs are, therefore, without commission, around PLN 1,000. A mortgage loan also means longer and more complicated formalities. It is not worth having fun in it, if we apply for a small amount, but if you are interested in the amount of several thousand, it is good to consider the option of a mortgage loan. The list of expenses must also increase with the insurance of the real estate that we want to pledge. Even if we have not insured it so far, we should start now. For example, a property worth 300,000 PLN zł. means an annual policy of PLN 100-300. Some banks also require to pay a premium for life insurance for each installment.