jaki jest minimalny wkład własny

What is the minimum contribution and what can it be?

The need to make the required downpayment for a mortgage loan can keep many Poles awake at night. This is because the ever-increasing prices of real estate mean that the amount of the own contribution often reaches up to PLN 100 thousand. Let’s check how much is the minimum own contribution and what it can be.

Mortgage loan, or what?

Before discussing the minimum down payment for a mortgage loan, it is worth noting what this type of loan is in its essence at all. Essentially speaking, the very term “mortgage” is just a colloquial term for a targeted loan, the purpose of which is usually to purchase an apartment or house.

On the other hand, an important element, if not the most important, is the collateral for this loan itself, which is precisely the financed real estate. A mortgage loan, in the sense that is used most often, is therefore a housing loan, the collateral for which will be a mortgage on the property being purchased.

If the borrower stops paying the loan installments, the bank can easily foreclose on the apartment or house, sell it and recover the borrowed money. The mortgage will appear in the real estate mortgage book until all loan installments are paid.

By establishing a mortgage on the financed property, banks are able to grant large loans / credits with repayment periods stretching as long as 35 years. One searches in vain for similar offers for cash loans or other types of loans without collateral.

Required down payment

In addition to the collateral itself on the property to be financed, banks also require a certain amount of the borrower’s own contribution to the financing of the apartment or house. Note that no institution in the country will provide financing for 100 percent of the value of the property, which is due firstly to the risks involved, and secondly to the laws imposed on banks by the FSA.

Real estate prices can change quite dynamically, admittedly, they usually increase, but the trend can sometimes reverse, and this makes a mortgage granted at the full value of the property, would be highly risky for the bank.

The full value of the property spread over installments plus interest would also be a greater burden for borrowers, which also entails a greater risk of defaulting on the loan in subsequent years, and would negatively affect both the financial system itself (in the case of a large scale), but also consumers, who could lose their properties. This, in turn, could ultimately result in the shaking of even the real estate market itself.

Minimum amount of own contribution

The minimum amount of own contribution has changed several times over the past few years. We have already had to deal with a five-percent deposit, then a 10-percent deposit, until ultimately, since 2017, the minimum deposit for a mortgage is already 20 percent of the value of the property.

This happened after the Financial Supervision Commission issued the so-called Recommendation S, which in a way forced banks to take certain actions when granting housing loans(secured by a mortgage). Admittedly, at the same time it left a certain loophole for both the banks themselves and borrowers, about which more below, but the fact is that the minimum amount of own contribution is currently 20 percent of the apartment or house.

The gateway we mentioned above is the possibility of taking out a home loan with an own contribution of just 10 percent of the value of the property, but for this to be possible, it is necessary to take out additional insurance. This is known as“low down payment insurance” and, as is not hard to guess, comes at an additional cost.

This insurance makes it possible for banks to grant a home loan / mortgage with a lower contribution, but you must remember that the mortgage installment will increase significantly. This is because we will have both 90 percent of the value of the property to repay, as well as the cost of insurance.

What can be an own contribution to a mortgage?

The minimum own contribution of 10 or 20 percent of the value of the real estate, established by the Polish Financial Supervision Authority, does not have to be made exclusively in cash. Admittedly, banks are most likely to accept it, i.e. borrowers’ savings, for example, but nothing prevents you from making your own contribution in another form.

what can be an own contribution
What can be an equity contribution for a mortgage? Photo: Animaflora via Canva

What can be considered an equity contribution for a home loan?
It all depends on the bank’s policy, but it is practiced to be able to contribute, among other things:

  • Other real estate, such as apartments, houses, plots of land, business premises, warehouses, plots of land, etc.
  • Funds accumulated in pension savings in the third pillar, i.e. Individual Retirement Accounts (IKE) and Individual Retirement Security Accounts (IKZE).
  • Funds accumulated under Employee Capital Plans (ECPs).

An alternative is also the recently introduced Home Contribution Guarantee provided by Bank Gospodarstwa Krajowego as part of the Polish Deal, However, it should be remembered that by using it, we will have to repay 100 percent of the value of the property, and this can be a major challenge in the years to come.

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