Mortgage loans – terms, contract, own contribution

Mortgage loans – terms, contract, own contribution

We take out mortgage loans from a bank to purchase real estate. This is a type of loan called long term. Its collateral is a real estate mortgage in favor of the bank, hence its name. Both private individuals and companies can apply for this type of loan. The average real estate loan period is as much as 25 years. Obtaining a mortgage loan is conditional on having a land and mortgage register.

Can we use the loan at will and what should the contract look like?

We cannot allocate a mortgage for purposes other than the purchase of a house or flat, erection of a house, completion of construction (previously started), renovation of a house or flat, purchase of a council or company flat. The bank is obliged to prepare a written agreement, which will contain all relevant information, i.e. the amount of the loan for which it was granted, what is its repayment date, as well as the interest rate and the bank’s commission for granting the loan.

What conditions must be met to obtain a loan?

The bank first examines the borrower’s creditworthiness, checks the databases on the current loan repayments. In addition, it is necessary to have an own contribution to obtain a loan. The necessity to have own contribution was introduced in 2014 by the Polish Financial Supervision Authority. Before the introduction of this requirement, it was possible to take out loans for up to 120% of the property value. Moreover, a maximum period of 35 years has been introduced. Currently, it is required to make a 20% own contribution. Considering very high real estate prices, this is an unattainable amount for many people. In 2018, there are several options for obtaining a positive credit decision without own contribution.

  • The MDM program, i.e. a flat for young people, is aimed at people up to 35 years of age who do not have their own real estate. The program ends this year.
  • You can get mortgages  by securing another property. It is important that the property has a higher value than the own contribution required.
  • Granting a loan for own contribution by the developer. Some investors meet the needs of their clients and offer loans.
  • An occasional flat bought below its market value also gives you a chance to buy a flat without your own contribution.

Can I cover my own contribution with funds from a cash loan?

Some people think that the easiest way to get own contribution is by taking out a cash loan. This is not the best solution for several reasons. The first is the fact that it is always an additional burden and another obligation, and we will have a housing loan. The second is that we lower our creditworthiness in this way and we may not get a loan for the property.

Up to what amount can you take out a mortgage?

The most important criterion in deciding the maximum amount of a real estate loan is the borrower’s creditworthiness. It is worth thinking about it before making the target commitment and paying off other liabilities, cards, debit lines. However, you need to calculate the expenses well and not to burden the budget unnecessarily. Having a creditworthiness to buy an apartment for a million zlotys does not mean that we have to buy such an expensive property.

What are the mortgage rate rules?

Banks granting loans for real estate most often grant loans at a variable interest rate. The interest rate charged by the bank depends, firstly, on the margin and, secondly, on the WIBOR rate, which is not dependent on the bank’s policy. With the loan, it will still be necessary to take out an insurance policy with an assignment to the bank.

Is it worth using the help of advisory institutions when taking out a loan?

There are many companies on the market that have financial advisory services in the field of granting loans. They offer offers of all banks that grant loans. Using the services of intermediaries is completely free, and a good financial advisor will choose the best loan for us, help with formalities and guide you through the entire credit path. These types of institutions also have interesting promotions due to extensive contacts in the industry, for example, you can get inexpensive appraisals, cheap notary services. If we do not have experience in taking such a complicated loan, it is a very good option worth recommending and using.


A mortgage loan is granted by a bank for a long period of time, on average it is 25 years. The maximum loan term is 35 years. Own contribution has been required for several years, which is currently 20%. There are several ways to bypass this requirement. The maximum amount of the loan granted depends on the borrower’s creditworthiness and his credit history. When taking out a loan, it is worth using financial intermediation, because they have offers from all banks, they will help you choose the most favorable one on the market and lead the customer to the end of the transaction.