It often happens that a person gets carried away and does not make the best decisions when it comes to mortgage selection. But don’t worry, taking into account the following factors will help you making that decision.
by Světlana Lanza, Finance specialist at M&M finance.
1. No Guarantee on Loan Approval
For this reason, I recommend dealing with financing in advance. The demand for real estate is huge, and with it, the fear that your property will run away and the pressure from brokers to sign a reservation contract is growing. The signing of this contract is also accompanied by the obligation to pay a reservation fee (usually in the range of CZK 50,000). If you do not meet the deadlines, you will most likely lose this fee.
2. Total Expenditure
If you received an indicative calculation at the bank or you used a mortgage calculator on the internet, where you found out the approximate price of the loan repayment, you need to realise that there are additional costs associated with the mortgage. This is mainly compulsory real estate insurance, the amount of which varies according to the value of the property, maintenance, electricity and gas fees, in some cases, the bank may also require life insurance when the business finds it risky. You need to know in advance how much you will pay each month and be able to set your budget accordingly.
3. Secure Financing
We never know exactly what awaits us in the future, and although I am optimistic, we also need to take into account the potential risks that may arise.
In the absence of sufficient financial reserves, it is necessary to properly set up insurance that will protect you from potential risk.
At the same time, I recommend starting to set aside money to cover necessary expenses in the event of unexpected situations. If no such situations occur, you will be able to repay the mortgage early. The situation of recent years has clearly shown us the need to have a safety net of cash. Amonst other things, the financial cushion will provide you with greater security in your life, you will not have to worry about possible changes in your job or, for example, moving abroad.
Finally, I add a few tips when buying a property:
1. The contract documentation will be checked by a financial advisor, if you have one (in terms of dates and amounts), have a lawyer check the legal requirements (the contract from the seller usually protects his interests, but your lawyer protects yours) orientation check of these two standard contracts in English are based on approximately CZK 3,000 – 5,000 one-time and can save you much more in the future.
2. Check the condition of the property technically, so that you know its actual condition, thus avoiding unpleasant surprises such as cracks in the walls, mould on the ground, etc.
3. If it is financed by a mortgage, agree on a procedure in case the estimated price of the property does not correspond to the sale price. Modify this procedure in the booking agreement so that you do not lose the booking fee unnecessarily.
If you do not want to think about these and other things yourself, and you want to arrange a mortgage easily and comfortably, I recommend working with an independent mortgage advisor who will look after these and other things for you.
Světlana Lanza – Finance specialist