Obligatory own contribution, contrary to the opinions of skeptics, should not bring a slump in the credit market. Insurance for the missing contribution and conscious saving will allow you to get a loan even in 2017.
In June 2013, the Polish Financial Supervision Authority adopted the long-awaited Recommendation S. According to its provisions, each new loan granted in 2014 may not be higher than 95 percent of the property value. This means that when buying a house or flat, we must have 5 percent of our own funds. From 2015, the necessary own contribution will amount to 10 percent.
In the following years
This requirement is increased by another 5 percent and from 2017 it will be necessary to have a 20% own contribution. However, it will be possible to take a loan not exceeding 90 percent, provided that you take out additional insurance covering the low own contribution of the borrower. It is also worth noting that the final version of Recommendation S is milder than its design. According to the first proposals, 10 percent were to be compulsory in 2014, and 20 percent just a year later.
We must start saving
The obligatory own contribution forced Poles to save. This means you have to manage your finances and plan your expenses properly. So what amounts should you postpone every month to raise the necessary 5 and 10 percent? If you buy property worth PLN 300,000, you must save PLN 15,000 and 30,000, respectively. So how many months and how much money should you accumulate to have sufficient funds when you take out a loan and buy real estate?
This comparison should be made
In relation to the future loan installment paid. If we incur PLN 285,000 (95 percent) for 30 years, then the installment will be from PLN 1,450 to 1,530. If we save the equivalent of a future installment for 9-10 months, we will collect the required 5% own contribution. If you borrow 270 thousand (90 percent), you will have to pay between PLN 1,370 and 1,450 for 30 years. If such amounts are set aside for 20 months, it will also be possible to accumulate the required 10% own contribution.
Of course, people who only start saving today for their own contribution, unfortunately, may not have enough time to postpone 5 or 10 percent, so that in 2014 or 2015 take a loan. However, if, after the adoption and announcement of the Recommendation in June 2013, we consciously began to save, then there should be no problem with own contribution.
This way of saving on your own contribution has one more advantage. It allows you to check your "predispositions" to save. In this way, we can check whether we can properly manage our finances and, therefore, whether in the future, after taking a loan, we will be able to allocate the appropriate amount every month to pay the installment.
Insurance can help
Recommendation S indicates that in 2016 we must have a minimum of 15 percent of our own contribution, and a year later 20 percent. It was also allowed to insure part of the missing own contribution. After 2016, the loan amount after insurance cannot be higher than 90 percent. At this point it is worth noting that this is not a novelty and for many years banks have been providing loans with such insurance.
In most institutions, the standard LTV level could not and still cannot exceed 80 percent, which is as recommended by Recommendation S since 2017. Only after insuring the excess loan above this level was financing possible in higher amounts. Even today, when granting loans for up to 95 percent of the property value, it is necessary to purchase such insurance.