The mortgage is associated with a considerable burden on the household budget. The installments are determined based on, among others creditworthiness and financial capacity of the consumer. However, variable interest rates are also important. However, are there ways to reduce the mortgage installment to a level that satisfies the consumer? Let’s get to know them.
Mortgages are a popular monetary liability given by banks to buy real estate or housing. Their prices remain too high for many interested parties to finance the purchase from their current funds and even accumulated savings. Despite this, the situation on the real estate market in recent years looks great.
Mortgage costs – what affects them?
When applying for a mortgage, consumers should be well prepared for, for example, the verification process before willing to make such a commitment. The bank will thoroughly review many aspects related to the potential borrower. This will allow this institution to assess the extent to which the customer is financially reliable and to what parameters of the loan the bank will be willing to grant the liability.
During the verification process, the bank checks, among others entries in the Credit Information Bureau, assessing eg the history of past repayments of liabilities, information on possible debts or arrears. In addition, the bank will also ask the consumer to provide information on employment.
You will need to provide income, information on seniority, the employment contract agreement and how long it lasts (eg for an indefinite period, 3 months, etc.). What else? The bank will also ask you to provide your monthly expenses, information on marital status, dependents and current liabilities. For housing loans, information about the amount of own contribution that the consumer would be able to make would also be significant.
Mortgage costs – how are they shaped?
This installment is an important part of the mortgage. The consumer eventually obtains a one-off commitment, that is, as money to cover the purchase of an apartment. In turn, repayment takes place in parts, ie installments, regularly paid monthly, until the end of the loan (ie most often, years after it was obtained). The installments are determined based on the client’s financial condition as well as other factors. We are talking here about interest, commissions and other fees charged by the bank as part of the cost of the service, as well as compulsory mortgage insurance and finally – interest rate.
In the case of interest, it may fall into various forms of realization of this claim. The consumer may bear the cost of fixed interest, thereby paying the same monthly installments throughout the life of the loan. It can also fall on variable interest rates, ie 3m vibration or 6m vibration. What is it about?
The variable interest rate, in short, depends primarily on the interest rates set by the Monetary Policy Council. As mentioned above, they have now been at the same level for almost 4 years. However, it may turn out that due to the current economic situation (eg inflation, collapse of the loan market), the MPC will change interest rates. It will also negatively affect the cost of loans through higher interest rates. On the other hand, if the situation is favorable – as it is now – the cost of loans is relatively low. As a result, they allow the consumer to save on interest costs.
The bank’s margin is another factor that affects the interest rate on the loan. This sets the percentage from which the profit is derived (eg 2.4%).
Mortgage loan reduction – is it possible?
A mortgage is a heavy burden on the consumer’s home budget. It should not come as a surprise that many borrowers are looking for different ways to keep the cost of this commitment and the associated burden as low as possible. However, are there any possible actions that will help reduce the mortgage installment?
In practice, there are methods that can allow this. However, you will need to look at them from an individual angle. Some methods can work only on specific mortgage terms, without finding application in other cases. However, let’s get to know the most popular ways to pay less for an installment loan and thus – relieve your monthly home budget.