Mortgage loans have remained the primary source of financing real estate investments in Poland for many years. Sometimes, however, there is insufficient creditworthiness on the way to your dream house or apartment. The situation may be improved by a loan against the plot.
Currently, most institutions require at least 20% of the property price. Many people who have other assets but cannot collect the amount they need could have major problems getting financing. However, many other factors affect creditworthiness assessment. It may be a good idea to take out a loan against the plot.
What is the loan against the plot?
When applying for a loan, the most important thing is credibility in the eyes of the bank. If we do not have a specific amount of own contribution, this is not only associated with a higher amount subject to credit, but also with a greater danger to the lender. However, analysts can convince the loan collateral with other assets to accept the application. In this capacity, we can also use our property.
The loan against the plot is particularly attractive. The value of the plot itself will measurably translate into creditworthiness, it may also have a positive impact on the conditions proposed by the financial institution. This does not mean, however, that the client will be exempted from providing other documents required by standard in the process of applying for a mortgage.
Pledge loan – necessary documents
The key issue in the process of applying for a loan against the plot will be proving that we have the right to the property, so we will enable entering the appropriate entry in its mortgage. To this end, we may be asked to submit:
- A notarial deed confirming the purchase of a property or receipt of a donation;
- Extract from the land register;
- Land and Mortgage Register number;
- Certificates of building conditions.
In addition, the assessment of the value of the plot is crucial for determining the conditions for granting the loan. For this purpose, it will be necessary to provide the opinion of a property appraiser together with photos of the property. The procedure for granting a loan against a plot of land does not differ from that provided for standard mortgages: the bank will therefore certainly also demand documents confirming the obtained income, and will familiarize itself with the credit history available in the BIK registers.
Pledge credit and mortgage loan
A tool similar to a loan against a plot of land is a mortgage, which consists in granting funds in exchange for establishing a mortgage on the property. However, in principle, this can be transferred for any purpose, so it is a relatively cheap alternative to cash loans. At the same time, the loan amount will depend mainly on the value of the property – depending on the specific bank, it can reach up to 80% of the valuation amount. Another benefit is the repayment time, which can be much longer than a standard cash loan and can be up to twenty years.
Attractive loan offers
Mortgages secured against plots of land offered by companies outside the banking sector are becoming more and more popular. These tempt primarily with the maximally simplified mode, bypassing, among others verification of borrowers in the BIK and BIG registers. Increasingly, the whole process can also be closed very quickly via the Internet, which is not conducive to a deeper reflection on the proposed conditions.
However, it should be remembered that all contracts in which a mortgage is established on real estate are associated with considerable danger and in the event of problems with repayment may end with its loss. On the market, there are many entities that take advantage of the difficult financial situation of clients. Therefore, it is necessary to carefully examine all the provisions of the contract and choose an option that guarantees not only obtaining a loan, but also the highest level of security and transparency of debt service.
Pros and cons of a loan against the plot
The main advantage of a loan against a plot of land is a significant increase in creditworthiness, which is directly reflected in the conditions proposed by the bank: it can affect the level of the margin and reduce other costs related to incurring liabilities. In many cases, it is also the only chance to obtain financing for people who do not have the funds necessary to cover their own contribution, which currently amounts to a minimum of 20% of the property price.
A similar instrument to a loan against a plot of land is a mortgage loan, which can be transferred for any purpose. In both cases, however, repayment problems may result in the loss of property, so you should carefully look at the offer and adapt it to your own financial capabilities.