From January 1, 2017, the next phase of the GFIC’s recommendations will come into force. Up to 20 percent own contribution for mortgage increases. This message embarrasses many people. Is there anything to fear?
What own contribution?
According to Good Finance experts, acting as an intermediary in obtaining loans for Good Finance customers, it should not be expected that all banks will increase the level of obligatory own customer’s contribution to 20%.
This is good news for people planning to buy an apartment next year. – It is almost certain that many banks will remain with the current option allowed by the GFIC expecting 10%. own contribution and residual value insurance against low own contribution risk – says Sean Cole, member of the board at Microfinance.
Thanks to this solution, the provisions of the recommendations are met, and the customer has a chance to get a loan with a higher LTV (Loan to Value).
How much is the insurance of a low own contribution?
In practice, additional insurance means a cost for the customer. – Banks use different solutions. Some increase the interest rate on the entire loan until the balance reaches 80% of the loan value.
Others, however, charge a fee for the entire period when the loan will be insured and it is a one-off premium – says Jessica Smith, director of Good Finance in Gdańsk. If we accept the purchase of property worth 300,000 In the first case, in one of the large banks the margin is increased by 0.25% until the loan balance drops below USD 240,000.
Therefore, the monthly cost of such insurance will be USD 133.62, assuming a 30-year loan period and a 3.56% interest rate. In the case of the second option in another bank, the one-off cost is USD 1,170.
There is no reason to panic
According to credit experts from Good Finance, there is no reason to make hasty credit decisions due to the turn of the year, which are dictated only by the upcoming changes in recommendations. –
A lot of information appearing causes consternation among customers who ask us many questions about whether they will actually be obliged to pay 20% of their own contribution in full.
Media reports on this topic have no basis in information from the banks themselves, which have not yet communicated an official position on this issue, which only proves that there will be no revolution – says Sean Cole. Official bank positions are expected during the upcoming holidays.