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Loan-related costs

When deciding for mortgage loan in a given bank, we cannot be driven solely by the level of interest rates. Additional charges may also constitute a significant cost that frequently determines the profitability of a given offer.

The specificity of banking fees and charges is their differentiation and the fact that their amounts can change during the term of the agreement. Each bank uses its own “Schedule of fees and charges” that usually constitutes an annex to our mortgage loan agreement.

It should be checked before obtaining a mortgage loan whether the bank collects a fee for the issuance of a mortgage loan commitment, i.e. the promise of the bank that a given person may obtain a mortgage loan of a specific amount. A mortgage loan commitment is useful when the parties of the transaction want to be sure that the buyer will have funds to buy the real property and there will be no problems with timely agreement conclusion. Banks, in a procedure similar to that of granting the actual mortgage loan, examine the credit-worthiness of the applicant and determine the amount the applicant may obtain. They charge a fee for this, usually from PLN 0 to as much PLN 400.

Banks frequently require confirmation of the value of the security of our mortgage loan on which the mortgage is established. This is accomplished by conducting a real property valuation or inspection executed by the bank. This implies an additional cost that a borrower must incur still before obtaining the mortgage loan decision. The cost of the real property valuation fluctuates with the range from PLN 0 to PLN 600.

The majority of banks granting mortgage loans do not charge a fee on consideration of the mortgage loan application. However, the situation is different in the case of the fee for granting the mortgage loan, which, depending on the bank and the level of securities, may even account for 5% of the mortgage loan value. In the majority of cases, banks offer promotions aimed at attracting customers by reducing or completely cancelling this fee.

In case of no fee for granting the mortgage loan, it is worth considering so called cross-selling. In the case of cross-selling, at the moment of applying for a mortgage the bank obliges us to also buy other products and services such as credit cards or security packages. On the one hand, cross-selling enables reduction of basic mortgage parameters such as the mortgage granting fee or the bank’s commission. On the other hand, the annual costs of using a credit card, VIP account or insurance against job loss may be sometimes breath-taking.

Foreign currency spread is a very important, but unfortunately rarely exposed, mortgage loan-related cost. The spread is the difference between the buy rate and sell rate of a given currency. Depending on the bank, the spread can even reach 10%. Although the mortgage loan is released according to the currency buy rate valid in the bank, the mortgage loan repayment will proceed at the currency sell price. Currency spread plays a vital role in the situation when a borrower plans earlier mortgage loan repayment, in a shorter time period e.g. in 5 years. In such a case the spread cost may exceed the cost of interest until that time, therefore its amount may frequently be the main selection or rejection criterion in reference to a given offer.

The assessment of foreign currency mortgage loan offers must include all costs that the borrower will have to incur, both before and after the loan initiation. Having full knowledge, the borrower will be able to determine whether the offer of a given bank is the most favourable for him/her. It is worth asking about absolutely all costs since the mortgage loan with the lowest commission is not always the most profitable offer for us.

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