Own contribution and mortgage

For many of us, a mortgage is the only way to get your own apartment. Currently, virtually every bank offers mortgage loans. However, for a bank to know a loan, you must have a proper own contribution.

Mortgage – own contribution

Mortgage - own contribution

Own contribution is the borrower’s own resources, usually accumulated cash or collateral in the form of real estate or movable property.

The own contribution can also be a construction plot, housing books with funds accumulated on them, our savings that we have accumulated in the Individual Pension Account, costs incurred with the construction of the house until the time of applying for a loan. A popular solution when taking a loan for the construction of a house are plots of land for their construction, or costs associated with the construction of real estate that have already been paid, e.g. the purchase of building materials. Own contribution is also an advance for the developer if we are applying for a loan to buy an apartment from the primary market.

Property loan

Property loan

If the mortgage is secured with another property, it may belong to either the borrower or another person, but he must agree to it. The value of such property must exceed the own contribution required by the bank or institution.

Borrowers who have a high down payment are in a winning position because the more money they have, the smaller the loan they must take, and avoid the cost of insurance, which is necessary for any borrower who has low down payment. Such insurance is a guarantee for the bank if the customer does not pay. The institution that insures is responsible for 20 percent. financial liability and the borrower is responsible for the remaining 80 percent. If the client loses financial liquidity, the insurer must pay the bank 20% back.