Getting a mortgage involves many procedures and difficult choices. The process itself can also take quite a long time, which is not only stressful but often makes it difficult to buy your dream property or plan an investment. A loan for building a house is, of course, a special case. Then the requirements for the borrower are slightly different. However, good preparation of the application can significantly reduce the necessary time and facilitate obtaining financing.
Building a house on credit: a pass to your own real estate?
The mortgage market is developing extremely fast, contributing to record increases in the entire real estate industry. According to the report prepared by the Polish Bank Association, 57 172 loan agreements were signed in the first quarter of 2021 for a total amount of PLN 17.94 billion. The total debt of Poles on this account already exceeds PLN 480 billion.
– A loan for building a house is, on the one hand, a standard product from the range of mortgage loans, on the other hand, it requires much more knowledge and good preparation – in which he advises, among others, what loan to build a house will be the most profitable. – Obtaining information about what a loan for building a house looks like in formal terms and preparation of the previously required documents will significantly speed up the entire process and avoid costly mistakes.
A loan for building a house: what will you need?
As in the case of a standard mortgage, a home construction loan is primarily associated with the use of a real estate mortgage as collateral for funds borrowed by a bank.
However, the assessment of the future value of the house is much more difficult, and the payment of funds looks completely different: instead of a one-time transfer, the client usually receives several tranches, allowing him to pay for the next stages of investment related to the construction of the house. Therefore, it may become necessary to provide, among others:
– documents certifying that you have a permanent income,
– the deed of ownership of the construction plot on which the building is to be erected,
– construction cost estimate,
– an extract and an extract from the land register,
– construction project,
– building permits.
Own contribution in the case of a loan for building a house
People trying to get a loan to build a house must also make their own contribution. Its amount depends on the specific institution. The absolute minimum is 10%, but very often it will be necessary to have a personal contribution of at least 20% of the amount requested.
In this capacity, however, it is not always necessary to bring in cash. A construction plot on which the building is to be erected as an own contribution will be a great help. On the one hand, it will reduce costs, on the other hand, it can also significantly speed up the entire procedure.
Good construction schedule and plan
A well-prepared cost estimate plays a key role in a loan for building a house. Importantly, the institutions have their own guidelines for the minimum rates necessary to complete the construction of a square meter of the investment and bring it to the agreed state. Therefore, the cost estimate cannot be understated.
Another important document is the work schedule: it is the implementation of the next steps that will enable the disbursement of the next loan tranches. Errors made during their preparation, especially wrong estimation of expenses, significantly hinder the payment of the loan and most often it is they that prevent the implementation of the investment in accordance with the plan.
Is it worth taking a loan to build a house?
It is undoubtedly quite a demanding and complex endeavor. In itself, however, it is not difficult and inaccessible. The basic condition – as in the case of other loans – is having adequate creditworthiness and own contribution.
The remaining factors depend mainly on the skilful planning and estimation of both expenses and the progress of construction works. It is worth cooperating with experts who deal with both loans for the construction of a house and the implementation of construction works. This will allow you to avoid many problems and smoothly go through demanding procedures.