Down payment for a mortgage in 2019

The rules for granting mortgages change over the years. Those who intend to use this banking product must keep up with the latest news on the subject. Above all, it is worth knowing how much the down payment for a mortgage is in 2019. Let us take a look at this issue.

• Changes in the down payment for a mortgage
• Main problems when saving up a down payment
• A model situation
• Higher interest rates and their consequences in 2019?
• Down payment set by Recommendation S

Changes in the down payment for a mortgage

More and more people take out mortgages every year. This upward trend has been shown in independent reports. In addition, as consumers we are opting for ever higher amounts, owing to relatively low interest rates. According to forecasts, however, these are set to rise in 2020 or, as some analysts predict, at the end of next year. It is worth bearing this in mind when repaying a loan. Those who are only now building up capital for a down payment must be careful. There is much talk that raising funds for this purpose will become harder.

Main problems when saving up a down payment

Analysts stress that in the near future banks will change their lending policy. Everything indicates that borrowers will have to demonstrate greater creditworthiness in order to obtain a mortgage in 2019. At present, a borrower who has no other collateral for the mortgage must have 10% of the value of the property they intend to buy. They must also pay extra fees out of their own funds (for the notary's services, the estate agency and the bank's commission). More and more banking institutions require a down payment of 20%. These rules currently apply at several large, well-known banks. Going further, we should focus on one important issue. What exactly does a bank's lending policy mean and what can be expected in this area?

READ ALSO – WHAT DOCUMENTS ARE NEEDED FOR A MORTGAGE?

A model situation

At present, changes in the amount of the down payment in 2019 are merely conjecture, based on earlier analyses. It is worth looking, however, at hypothetical situations that may occur. First of all, the DTI ratio, which measures debt relative to income, may change. The lower it is, the worse for the borrower. Assuming that the DTI is currently 50 per cent, a person earning 4,000 PLN net a month could put 2,000 PLN towards a mortgage instalment. If banks lower the DTI ratio to 40 per cent, the maximum mortgage instalment could be no more than 1,600 PLN. Such calculations mean that three possible scenarios will have to be considered. It will become necessary to reduce the loan instalment (so that it is no more than 1,600 PLN), to extend the loan term, or to increase the down payment. It is this last scenario that is the main focus of this article, so what should be kept in mind?

Higher interest rates and their consequences in 2019?

It cannot be ruled out that banks will raise interest rates in 2019, which will affect the cost of a mortgage. If you opt for a loan of 200,000 PLN, you will need to save (depending on the bank) from 10 to 20 per cent of the value of such a property, that is 20 or 40 thousand PLN. For now it is not known whether this situation will change over time. Some believe that these requirements will not be modified. Much will become clear once it is known how the mergers of further banks will go. This is important because these institutions have recently been merging quite often, which affects the range of products that financial institutions offer.

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Down payment set by Recommendation S

Why exactly do banks require a down payment? It is a requirement imposed on banks by the Polish Financial Supervision Authority, which introduced Recommendation S in 2013. On the one hand it has made mortgages safer for borrowers, on the other it means that a considerable sum has to be put aside in order to apply for a loan for your dream property. This solution is, however, a safeguard for the bank. A borrower who is able to save the given amount becomes more credible. They also have the opportunity to negotiate the terms of the loan with the bank and reduce its overall cost.

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Changes to the down payment may come in the near future, and it is worth following market trends. The most reliable knowledge on the subject, however, is held by professionals. That is why you can bring any questions to the advisers at REMAX Gold, who will explain the subject.