Home loan – sounds scary, right? Some people like to call it short term crutch, but I am not that critical, because I am well aware that in our country, buying an apartment without using a loan is an abstraction for most young people. This does not mean, however, that you can approach the issue of taking a loan just like that, without any preparation, based only on imprecise information about your creditworthiness. Borrowing a large amount is an extremely serious decision that should be prepared in advance.
1. Collect your contribution
A banal that is unfortunately often forgotten. Virtually no bank on the market offers mortgage loans for 100% of the property value. Why? Because such offers have led thousands of people to the brink of bankruptcy. Currently, such a decent minimum is 20% of your contribution, but I recommend that you collect even more.
Surely the thought of taking a loan did not come to your mind yesterday. So you have some time to tighten your belt, cut out various expenses, work harder, and thus accumulate more of your contribution. What do you gain from this? Either a shorter loan period or a lower installment. Both situations are most beneficial.
2. Build a financial cushion
When collecting your contribution, do not forget that it is always worth having some money for the so-called black hour. Life can be unpredictable and it is extremely stupid to spend all your savings on your contribution to the loan. Everyone should have a financial cushion of at least three times the monthly salary of adult family members. If you earn 3,000 zlotys per hand, your pillow should be at least 9,000 zlotys, and even better, if you manage to collect funds that will allow you and your family to survive six months or a year without stress.
Such a pillow may come in handy when, for example, you lose your job and the loan still has to be repaid. Thanks to this, you will gain time to calmly look for a new job. I wrote about the financial cushion in the entry: “For a rainy day”, i.e. my emergency fund.
3. Choose an apartment that you can afford
It is not worth succumbing to it when choosing an apartment. Now you have strength, health, and a good job, but you don’t know if in 5 years you will still be able to pay off a huge loan to buy a luxury apartment in the city center. Measure your intentions and get the brutal truth into your head: you buy a flat with the bank’s money, not yours. Do not lightly spend money that you have not earned.
4. Pay off other liabilities
This is the best time to get rid of any loans, installments, etc. Review your liabilities and pay them back as soon as possible. Thanks to this, you will not only have greater creditworthiness but also you will not drown in installments once you take out a mortgage.
5. Cancel your credit card
A credit card is a useful thing, which I already wrote about on the blog. However, if you want to take out a mortgage, it is worth giving it up. Again, one of the arguments is to increase your creditworthiness, but it is much more important to implement financial discipline. You will make a big monthly commitment and it is better not to risk the temptation to use a very expensive loan under the limit on the card.
6. Check your history in BIK
If you do not know how to do it, I invite you to my BIK guide. Checking your BIK history is very important because you will know in advance how the bank will assess your financial situation. Thanks to this, you will not be surprised by, for example, refusal to grant a loan. Also, the information contained in BIK will allow you to make sure that you are settled with all institutions in which you have ever committed. Everyone has the right to do it for free on the BIK website.
7. Calculate your credit score
You can do it in a fairly simple way again. I invite you to my guide on this topic. This information is very valuable because you will immediately know where you stand and whether you have the right to think about taking a mortgage at all. There will be no unpleasant disappointments and no waste of time.
8. Apply for a loan at several banks
Thanks to this, you will gain room for maneuver and minimize the risk of leaving nothing if the bank makes a negative decision (and this can happen even despite your creditworthiness). Remember that the process of applying for a loan is quite time-consuming, so it is better to start the procedure in parallel at several banks so that you do not have to start from scratch later.
9. Read the credit agreement carefully
It is a long document written in an unpleasant and difficult language, so always ask for a copy of the contract to be delivered to your home so that you can read it carefully. If anything is incomprehensible to you or raises your doubts, do not hesitate to seek the help of a lawyer specializing in credit matters. This service is not expensive – it costs from about PLN 300.
10. Strengthen your position at work
If you are employed on a temporary contract, be sure to ask your boss about the possibility of switching to an open-ended contract. Give him arguments, of course – start working harder, try harder, screw the results. An indefinite employment contract does not guarantee complete peace of mind, but at least it will give you the certainty of obtaining a three-month notice period, which is of great importance when paying off your mortgage. Such a contract is also more valuable for the bank that can give you better terms.
As you can see, there is a lot to do, and this is only the stage of getting ready to take out a mortgage. Do not underestimate any of these things, because in total they will improve your negotiating position in the bank and will give you a greater sense of security when you start paying off your loan.