Knowledge of the basic concepts related to mortgage is necessary to make informed decisions about incurring liabilities, which remains the main source of financing real estate.
Experts from the Association of Financial Consulting Companies have prepared a dictionary that will help supplement knowledge in this area.
Obtaining a mortgage is a long and multi-stage process
Obtaining a mortgage is a long and multi-stage process, which according to Good Finance is decided by 84% of Poles . However, before we start looking for your dream home, let’s try our best to prepare for commitment. – Finance knowledge is useful for this.
For example, by building your credit history, we become more credible to the bank. It is similar to creditworthiness, which we can consciously influence and increase our chances of getting a loan – says money, GFIC expert. Therefore, before we go to the bank or financial advisor, it is worth familiarizing yourself with the basic concepts of loans.
Creditworthiness – if we have it, it means that, according to the bank, we can handle the repayment of the loan or loan we are applying for, together with interest on time. The ability is influenced by various factors such as e.g. fixed expenses, other charges in the form of loan installments, number of people in a household, type of employment or amount of income.
Credit history – information for the bank about previously incurred liabilities, such as e.g. loans, credit cards or debits. The bank investigates, among others timely repayment of installments both in the past and now. The source of information for financial institutions is usually the Credit Information Bureau.
Mortgage – a simplification is a law that is intended to help recover the debt. Usually, it is collateral for loans for the purchase of an apartment. When the customer stops paying the installments, the mortgage allows the bank to sell the apartment, which is the property of the borrower, and thus recover the money and interest borrowed. The mortgage must be entered into the land and mortgage register.
Interest rate – the basic parameter on which the cost of the mortgage depends. In our country, it is usually variable and consists of margins and the so-called base rate, which is usually 3M WIBOR. The margin is constant throughout the repayment period and WIBOR may change. Loans for which the interest rate is fixed in the first few years of repayment are also available.
Margin – a component of the loan interest rate, which usually does not change throughout the loan period. The higher the margin, the higher the interest rate, so look for offers with a low margin.
Loan period – the time precisely specified in the loan agreement, during which the loan must be repaid in full.
Decreasing installments – those are installments whose theoretical amount should change over time. In practice, however, it may happen that the installment increases, as their level depends on the interest rate on the loan. They are less popular than equal installments because at the beginning repayments are higher than equal installments, but later they become lower.
Equal installments – installments whose amount will only theoretically be constant throughout the repayment period. In practice, their level changes due to changes in the interest rate on the loan. They are much more often chosen than decreasing installments, because at the beginning repayments will be lower, but later they will be higher.
It is worth asking and supplementing knowledge
Knowing the concepts of mortgage can be helpful when choosing the best offer and even when negotiating the terms of the contract with the bank.
When looking for a mortgage offer, it is worth consulting with an experienced financial advisor – his support is useful when you want to know individual indicators of the offer, e.g. interest rates and compare them comparing the offers of many banks.
The help of an adviser is also irreplaceable when we have doubts about individual points of the loan agreement. The adviser will gladly explain all the complexities of banking procedures and check if the document contains the so-called “Everything about Credit” – summarized Jessica Brown, GFIC expert, Gold Finance