There are such expenditure which cannot be financed from current funds. However, you may need them to have them. This group includes real estate and apartments, which millions of people finance from a popular commitment – a loan. What requirement must be met to get it? We present the conditions for obtaining a loan for an apartment.
Loan for an apartment, ie a mortgage
Under the term “home loan” there is a somewhat more professional and equally popular term – mortgage. It is a kind of financial commitment incurred for the purchase of an apartment, and besides – also the purchase or construction of a house. Mortgages are usually taken for amounts of hundreds of thousands of dollars (eg USD 200,000), and their repayment period takes years. For this reason, consumers pay this commitment in the form of installments, the amount of which, along with a number of other key parameters, is determined during the customer verification phase.
Mortgages are granted only by banks, which is why the general conditions they present can be easily collected and presented in one text – which we also do.
Conditions for obtaining a loan for an apartment
The value of the commitment, which is given by the bank to finance the purchase of an apartment, is so large and reports to an important subject that the banks have developed extensive procedures to verify the consumer. Specific requirements must be met. This will allow the bank to entrust the consumer with money in a certain amount, for a specified period and under agreed conditions.
What conditions for obtaining a loan for an apartment operate on the banking market? Let’s get to know the most important stages that every consumer applying for a loan will have to go through.
An important factor when granting a mortgage to consumers is also their age. Banks most often grant loans to people who have adequate creditworthiness but are also of the right age. The maximum mortgage term is 35 years, which is why the bank, when making such a commitment, must take into account the average age of the consumer that it will reach when the last installment is paid. Typically, banks assume that the borrower should not be older than 75 to 80 when the last part of the mortgage is repaid.
Impact of the above factors on loan parameters
As already mentioned in the first part of the text, the assessment of the above factors by the bank starts the process. With a good assessment of creditworthiness and positive verification of other regulatory conditions, the bank calculates specific loan parameters.
- Loan amount – based on verification of creditworthiness, and further, after assessing the amount of e.g. current liabilities and expenses, the total loan amount for which the bank can grant a mortgage is determined. For example, insufficient earnings can reduce the amount the bank may be willing to commit.
- The amount of the loan installment – along with determining the final amount of the loan that the bank is able to agree on, the amount of the monthly loan installment is also selected. The consumer is obliged to repay them on time and in the same amount.
Moreover, the amount of the monthly installment also includes additional costs that cover the entire loan.
- The cost of estimating the real value of the apartment by a bank appraiser.
- Interest. Depending on the individual offer of a given bank, it may be fixed or variable.
- Bank’s margin included in the interest rate.
- Credit insurance. A mortgage is a relatively high-value liability regarding expensive property, which is why most banks require the borrower to take out compulsory insurance. It is a form of additional security of the liability in case of fortuitous events (accident, death) or consumer evasion.
- Bridging insurance. Insurance between the moment of transferring the loan and entering the mortgage in the land and mortgage register of the flat.
- Bank account fee.
To sum up, when applying for a loan for an apartment, it is worth familiarizing yourself with a set of basic requirements that banking institutions address to potential customers. This will not only allow you to become aware of the bank’s competence in verifying consumer data. Perhaps, we will be better prepared for a visit to the bank.