Mortgage loan margin – what is it and how much is it?Uncategorized
In many cases of Polish families, and earlier of the marriages themselves, the mortgage is becoming more and more crowded with the form of raising cash for building a house or buying a plot.
We apply for a mortgage not only in the case of buying our own home but also plans to buy real estate and opening our own business. The signing of the final contract, and thus the longed-for receipt of a mortgage, involves going through a series of procedures required by the bank.
From the presentation of necessary documents and benefits to the impatient anticipation of the final decision. In many cases, however, it happens that people who are willing to obtain this loan come to the given facility completely unprepared and without any knowledge of what obligations the signing of the contract entails. Therefore, it is worth spending some time before a direct visit and learns about the loan repayment amount.
The main factor determining the total amount of return for a bank is the mortgage margin. On its basis, you can specify the amount to be paid in detail, and thus calculate the monthly installment and interest rate on the loan. This margin includes the reference rate and the bank’s margin. The first term simply means the amount that the bank must invest in order to transfer the funds purchased in this way for our use.
This, in turn, must be strictly documented and planned before signing the contract with the bank, because its lack simply prevents you from getting a mortgage. The reference rate depends mainly on the aspect offered by the given institution. By paying us funds, the bank uses deposits, deposits and other investment programs, on which customers invest certain amounts, thus receiving a certain percentage of profit.
To earn, an institution spends this money as quickly as possible, including by granting a mortgage with a certain margin. And this is the second factor affecting the final amount, i.e. the amount (additional percentage) that the bank earns on us. To sum up all this in a logical puzzle, the easiest way to illustrate the amount of the margin as the following sentences:
- reference rate – the price at which the bank buys funds that are later transferred to us as part of the mortgage
- bank’s margin – an additional percentage to the rate, which is the bank’s net profit
It is worth mentioning that the first factor does not fluctuate too much, because the branches themselves do not constantly change the percentage of deposits, systematic saving programs, long-term deposits, etc. The second one is subject to different configurations, depending on the financial situation of the given bank, what is our credit standing etc.
Margin uneven …
When deciding to take out a mortgage, you should not mindlessly agree to the imposed conditions. The loan margin can be negotiated, so why not at least try to lower your future monthly installments? The more that it is subject to constant changes.
In addition, it is determined separately for each purpose for which the mortgage is to be used. And so it achieves the lowest value when it comes to matters related to construction and housing, and the highest if you want to open your own businesses.
The mortgage margin throughout the entire repayment period does not change unless the bank provides for this possibility and of course this will be with the approval of both parties.
However, it is worth spending a little more time on earlier negotiations at the branch and determines the optimal level for yourself so that the monthly installment oscillates at a relatively low level, and the bank had no reason to be dissatisfied.
In order to win the most attractive terms of cooperation
Many factors are taken into account, apart from the aforementioned purpose of utilizing the contracted amount. Banks also pay attention to the so-called LTV indicator, i.e. the sum that the investor is able to invest. It is simply the quotient of money from the loan and the value of the goal. The lower the better, because then our chances of a small margin are much higher. This is because the banks themselves agree to a smaller risk by borrowing smaller amounts.
The last factor that also determines the final amount of the margin is whether we use or are planning to start using other products of a given bank. If so, let’s boldly fight for better terms when granting a mortgage.
If you already have a mortgage on your shoulders, pay attention to whether the early repayment of the mortgage, consolidation loan or refinancing does not pay off. Answers to these questions can be found on our website.