The combination of a mortgage and a flat finish is currently the most popular solution among people who decide on their own property. So what is the whole process of granting a loan and what should be remembered when going to the bank for a loan?
Financial liquidity is a key condition
Before the bank grants us a mortgage in the required amount, it must check our financial liquidity, in other words, how much expenditure we have each month, and how much income and whether we can afford to pay the loan installment in a calculated amount. Mortgages have a very long repayment period, which is certainly something everyone knows and counts on the fact that a specific installment will accompany it for the next 25-30 years. In addition, everything also depends on how the economic situation will look like in the coming years, as well as whether we decide on a foreign currency mortgage.
What does the mortgage payment look like?
When financial liquidity issues are over, it’s time to explain how the bank most often pays out mortgages. We decided to take out a loan for the purchase of real estate and its finishing, so the bank will transfer part of the loan that is intended for purchase to the seller’s account, while the part intended for finishing will transfer to the client’s account. This is practically always the case and it does not matter whether we buy real estate from the secondary market or straight from the developer. It is also worth emphasizing that the part intended for finishing is most often divided into tranches, and not paid in full by one transfer. In this way, banks want to control whether money is spent in accordance with the cost estimates provided by customers. In the case of lower finishing loans, the bank may divide the entire amount into two tranches (not necessarily equal), however, in the case of much higher amounts, the bank may have divided them into 3-4 tranches. Therefore, you should be aware of the fact that the entire amount for renovation will not appear immediately in our account.
Mortgages – own contribution issues
Of course, the issue of own contribution, which is always required by every bank, is also very important. Recently, the amount of own contribution required by the bank is increasing more and from now, it will reach 20% in the next few years. However, for the purposes of this text, let us assume that the bank is demanding 10% own contribution from customers. This means that borrowers must be the amount of 10% of the own contribution for the purchase of an apartment + 10% of the own contribution for finishing! Assuming that the purchase amount of the property is $ 300,000, then the customer must have $ 30,000 own contribution. For this we also want a mortgage for finishing in the amount of $ 50,000, so we still need $ 5,000 (or 10% of $ 50,000). A significant proportion of customers are not aware of this fact and how the bank calculates the amount of own customer’s contribution, which is very important.