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Mortgage loan for purchasing of real estate in Poland. Part 3

 Buying an apartment with a mortgage is a very good decision if you do not want to pay rent, and the loan payments will go towards purchasing your own apartment. To begin with, let's figure out whether the apartment bought on a mortgage is your ownership.

 Mortgage is a targeted loan to buy a real estate. A bank issues a certain amount and takes as collateral the estate, which is purchased with this money. After receiving a mortgage loan, a borrower cannot buy a home until the bank approves it. And even after the purchase, the owner will be able to dispose of the property only partially. Redevelopment and sale of estate must be agreed with the bank. Having received a mortgage loan from the bank, a person can immediately move into a new home. Mortgage is beneficial for people who do not have the accumulated funds to purchase estate, or when these funds make up 10-20% of the purchase price.

Early repayment of mortgage loan

Banks earn interest, so they are not interested in early loan repayment. By performing this action, the borrower minimizes overpayment, and the financial institution loses the previously agreed profit. Ideally, for the bank, the customer should pay the premiums on time, remember about the insurance, send the necessary documents, and follow the repayment plan.

For loans with variable interest rates, the bank cannot charge for early repayment after 3 years of regular repayment. Therefore, if you decide to pay off mortgage before the end of 3 years, you must take into account an additional bank commission - no more than 3% of the repayment amount. If the loan agreement was signed after 21st July, 2017 and more than 3 years have passed since the loan was issued, the borrower will no longer have to worry about additional costs associated with early repayment.

There are two options for early repayment of mortgage obligation. The first option is the overpayment of contributions, that is, the introduction of a larger amount, which allows increasing the monthly contribution and, in general, prematurely closing the full amount. The second way is to repay mortgage early in one payment. However, this option is especially prone to having to pay an additional commission. The bank can protect itself from early loan repayment due to loss of interest income. Before deciding on the premature repayment of the loan, it is recommended to read a mortgage loan agreement in detail, because it should contain information about whether the bank has the right to compensation.

What about the loan commission and insurance?

In September 2019, the Court of Justice of the European Union issued a decision on early repayment of loans and partial compensation of the commission and ruled that in case of early repayment of the obligation, the borrower is entitled to proportional compensation for previously incurred expenses. Having paid off the obligation earlier, you can request that the bank reimburse a proportionate part of the fees incurred in this regard. This decision also applies to mortgages repaid before the date specified in the contract.

In such a situation, you can apply to bank to refund of part the commission, since you have the right to a proportional reduction in all costs incurred during the entire loan term. If only half of the period for which the loan was taken has expired, the European Court of Justice considers that the bank should return half of the commission charged. For example, if the loan was for 300,000 PLN and the commission was 3%, it is 9,000 PLN the bank must give you 4,500 PLN.

In addition, each borrower is entitled to reimbursement of other expenses such as insurance. Mortgage insurance is another source of many costs. There are several types of insurance for mortgage loan: from low own contribution, life insurance, real estate insurance. If the bank has appointed additional payments in advance, then in case of early repayment of the loan, it must return part of the payments for the unused protection period.

Non-payment of contributions

Late repayment of the loan is associated with the possibility of the bank's compulsory debt collection. The bank can collect the debt itself, send reminders to the debtor to pay off the debt, or transfer the case to a debt collection company. As a last resort, go to court.

Losses of credit and debt collection procedures are not in the interests of the bank. At the initial stage, the bank tries to inform the borrower about the need to resolve problem debt. In the beginning, reminders in the form of phone and emails. А quick settlement of the obligation does not threaten the termination of the loan agreement. The main thing is not to avoid contacts with the bank if difficulties arise with the repayment of subsequent contributions. Contact a credit advisor or the bank's hotline and explain the reason. Such cases are considered individually, and it often happens that the bank offers additional services, including:

  • Grace period in repayment of principal or interest
  • Credit holidays
  • Extension of the loan term
  • Total conversion

Apartment for sale in mortgage

While a mortgage seems like a commitment that cannot be waived, an apartment with a mortgage can be sold. Of course, this process is more complicated than selling apartments without mortgage. The process should begin with obtaining a certificate of current debt from the bank. The main difference is the breakdown of the payment into two instalments: the bank will receive the amount of the due obligation from the buyer or seller, and the seller will receive the difference between this amount and the price of the property. The bank must also issue a commitment to remove its data from the mortgage of the real estate that the seller must provide to the buyer. The buyer can also use a mortgage - the procedure is not much different from buying an apartment without a mortgage and getting a loan for it. As for the notary fees, they will be higher when selling an apartment with a mortgage.

It can be concluded that the apartment purchased for a mortgage loan is the property of the buyer and can be sold, subject to the procedure for repaying the loan debt to the bank. Failure to pay contributions may have negative consequences, and recommended not to avoid contacts with the bank in the event of a loss of solvency. The timely repayment of the loan has a positive effect on the credit history and obtaining future loans from banks and other institutions.

If you have additional questions on this topic, or if you need a credit consultant, we will be happy to recommend our partner.