How to take a loan to build a house? Step by Step Guide

construction loan
Hand of Business people calculating interest, taxes and profits to invest in real estate and home buying

In the case of a home construction loan, the down payment is exactly the same as in the case of a standard mortgage . From 2017, in accordance with the guidelines contained in Recommendation S, people applying for such financing should have at least 20% of the target value of the property , which is the security for the loan after construction.

Is it possible to take out a loan to build a house without your own contribution? It turns out that it is, but only in specific cases. In mid-September 2021, an amendment to the Construction Law was signed, which allows the construction of a house with an area of ​​up to 70 m2 without a permit. The state-aided investment can also be financed with a preferential mortgage loan , where the required 20% will be guaranteed by the state-owned Bank.

The interest rate on the loan to build a house

Undoubtedly, one of the most important parameters regarding the cost of the loan are: the interest rate and the commission charged for joining the obligation. The interest rate is shaped by, inter alia, bank margin. It is negotiable with the bank , just like the bank commission, but when looking for attractive mortgage loan offers for building a house, it is not always highly negotiable.

Similarly to mortgage loans taken by clients to buy a flat or a house, a loan for building a house with a mortgage security is also low-interest.

It is worth remembering, however, that currently (January 2022) interest rates are constantly growing , and this means that the installment of a potential loan may be much higher than a few months ago. The next time is to bring new increases, so if building a house is not urgent, it is worth waiting for the situation to stabilize a bit.

How to take a loan to build a house? Step by step

The procedure for applying for a mortgage can be complicated for many. The list of conditions necessary for a loan to build a house is even larger, so it is worth using the help of a loan advisor.

How to get a mortgage to build a house? Step by step instruction

  1. Choose a construction plot and a house plan.
  2. Get the best loan offer.
  3. Get a building permit (if required).
  4. Complete a loan application.
  5. Attach the necessary documents . Most banks require the following from their prospective clients:
    • income certificates;
    • employment certificates issued by the employer;
    • in the case of running your own business – annual PIT return;
    • a document confirming the ownership of the plot on which construction is to begin (an entry from the land register or a notarial deed is enough);
    • building permit (if required);
    • construction design with a detailed cost estimate for the entire investment .
  1. Wait for the credit decision to be issued.
  2. In the event of a positive decision, sign the contract and wait for the payment of the first loan tranche.
  3. Make the required own contribution (the moment when it should be done depends on the individual arrangements of the bank).

A loan to build a house and creditworthiness

When applying for a mortgage loan, in addition to the required own contribution, you should have a sufficiently high creditworthiness. Fortunately, before submitting your application, you can check for yourself whether your capacity will be sufficient to receive the estimated amount of funding. How? A creditworthiness calculator can be used for this purpose , which will additionally present a list of proposed offers.



Please enter your comment!
Please enter your name here