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
- Choose a construction plot and a house plan.
- Get the best loan offer.
- Get a building permit (if required).
- Complete a loan application.
- Attach the necessary documents . Most banks require the following from their prospective clients:
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- 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 .
- Wait for the credit decision to be issued.
- In the event of a positive decision, sign the contract and wait for the payment of the first loan tranche.
- 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.