How to prepare for taking out a mortgage on a flat?

Many people who want to buy a flat have to turn to a bank for a mortgage. Few can afford to spend several hundred thousand PLN on the spot, and the dream of a place of one's own comes to almost everyone at some stage of life. Fortunately, thanks to banks, many people can fulfil their wish sooner. Before you take out a mortgage on a flat, though, find out how to prepare for it.

Take care of your down payment

Whichever bank you decide to take out a mortgage with, remember that it will require a down payment from you. This must be at least 20% of the property's value. The down payment limits the bank's risk should it turn out that the borrower is unable to repay the loan and has to sell the property. In addition, the initial sum acts as a kind of filter that screens people applying for a mortgage.

Protect yourself financially

Before we decide to take out a mortgage, it is worth building a financial safety net. Putting all of our savings into the down payment is not the best idea. It is always worth keeping a few thousand or a dozen or so thousand PLN set aside in case of, for example, job loss or unexpected expenses. This will allow us to pay the instalments on time and give us peace of mind.

Do not sign agreements you do not understand

A loan agreement contains many provisions that are not clear to the average person. Terms such as LTV, DTI or low down payment insurance mean little to most of us. So before you sign a mortgage agreement with the bank, ask exactly what all the additional clauses mean. Before signing, you can also consult a financial adviser about the content of the agreement.

Choose the best loan offer

Most people who want to take out a mortgage on a flat decide to use the bank where they currently have an account. It may indeed turn out that our bank has the best loan offer, but to find out, it is best to learn what other institutions have to offer. Only after a thorough analysis of all the offers should the final decision be made.

Take all the costs into account

When buying a flat or a house, we must remember that the costs of the transaction do not end with the price of the property itself. A number of additional items will appear along the way, such as the notary's fee, the entry in the land and mortgage register (księga wieczysta) or the tax, as well as the estate agent's fee, if we use their services. So before we decide on a mortgage, let us take all of these elements into account.

Build up your employment record

To be able to take out a mortgage, you need a suitable length of employment. For an employment contract (umowa o pracę) it is 3 months, for a contract of mandate (umowa zlecenia) 6 months, and if you run your own business, a year.

Take care of your credit history

When deciding whether to grant a mortgage, the bank will check our credit history to date. On this basis it will assess whether we are able to pay the instalments on time and whether we have had problems with repayments in the past. So if you are planning to apply for a mortgage on a flat, start building a good credit history now. How? Buy on instalments or get a credit card and use it regularly.