A mortgage is usually the only way to buy your own apartment. Unfortunately, it is not always easy to get it. Low earnings can be an obstacle. Can you solve this problem?
Borrowing money is a popular way of financing various purchases. Sometimes a few hundred or several thousand USD is enough and then the solution is a quick loan, and sometimes you need several hundred thousand USD. The latter amount is necessary most often when buying an apartment and requires a mortgage.
Many Poles use this solution. It is worth adding that in 2018 they repaid a total of 2.2 million mortgage loans for a total amount of USD 415.1 billion. Most often, Poles borrow between 100,000 and 200,000. USD, and most often they buy flats with an area from 45 to 55 m2.
The problem, however, is that apartments are becoming more expensive, and this means the need to take out higher and higher mortgages. In the case of low earnings, however, there may be a problem with getting even a small loan for an apartment. In this situation, is it only to give up buying your own “M”? Not necessarily. Before we get to that, let’s check how much money you have to earn to have a chance at a mortgage in the bank.
How much do you have to earn to take a mortgage?
Creditworthiness is key when taking out a mortgage. At the same time, one should be aware that virtually every bank counts it slightly differently. This means that in one bank we can be refused a loan, while in the other they will lend us money.
However, there are several issues that are common when calculating creditworthiness regardless of the financial institution. The customer’s credit history is important. The bank always looks a bit more flexibly and favorably at solid borrowers. The cost of living is also important.
Here, the marital status of the applicant for credit is analyzed and whether he has children and how many there are. Some banks, although they do not speak about it loudly, also pay attention to the type of employment. The most desirable borrower is a person employed under an employment contract. This situation is perceived as the most stable.
The most important, however, is the earnings level of the mortgage applicant. Recommendation T The PFSA requires banks that the loan installment should not exceed half of the average remuneration, i.e. USD 3,665.39 net. This means that such an installment in 2019 cannot be higher than USD 1,832.69. With this level of earnings, however, there should be no problem with taking out a mortgage. The problem may arise at the lowest national, especially if the applicant has several dependents and incurs high costs in this respect.
Can you increase the chance of a mortgage?
Of course, there is always a chance to improve your financial standing in the eyes of a bank that would grant us a mortgage. Therefore, we can not give up after the first refusal, but you need to think about how to increase your chances of borrowing money.
The best solution would be to find a better paid job, but this is not always possible in a short time. In addition, the banks want a certificate of earnings for at least three months. It is therefore worth considering other options.
First, reduce your living costs as much as possible. Of course, this should not be exaggerated, because providing very low maintenance costs will not be taken seriously by the bank.
By the way, one important point should be noted: banks grant credit to a childless marriage faster than a single. The spouses’ creditworthiness is greater than that of a lonely person, because the cost of living is divided into two people, and therefore smaller.
First of all, you must get rid of various obligations as soon as possible. It is a good idea to pay off all loans as soon as possible. However, this is not all. It’s also best to get rid of all credit cards that reduce creditworthiness. A revolving personal account has the same impact.
At low incomes, choosing the right installment type and extending the loan period can also help. One then talks about mortgage optimization. The choice of equal loan installments and the maximum available repayment period usually effectively increases the creditworthiness. Unfortunately, then the total cost of credit increases.
Therefore, you should think about whether you want to buy an apartment, but for money borrowed at a high price. It should also be emphasized that the bank does not always agree to the maximum extension of the loan repayment period. For example, the borrower’s age may be an obstacle.
There is also some room for action. Some banks demand that they pay at least 10% of the flat’s value from their own funds, and some want 20% of their own contribution. In the case of low earnings, however, a minimum level of own contribution may not be enough. The solution is to accumulate the largest possible own contribution, which would be definitely higher than the minimum level expected by lenders.
Loan alone or with someone?
Sometimes it is more profitable to take out a mortgage yourself, and sometimes it is worth joining a second person. It depends on the situation.
We wrote above that a childless marriage is more likely to have a mortgage than a single. This, however, works when both spouses earn an income and work. At low incomes, a problem arises when one person works. The solution may then be to establish property separation. From now on, the borrower will become a separate household under the law and his income will not be divided into other persons (e.g. a spouse).
Unfortunately, sometimes the above solution is not enough. Then a good idea would be to enter into a commitment with a co-borrower or find a guarantor with high creditworthiness.
In the case of low income, taking out a mortgage is not easy. However, thoughtful action and optimization of the parameters of the liability can help in obtaining a positive decision of the bank.