The big credit overview
The big credit overview
Is it worth taking out a loan now?
>> interview with financial expert Csaba Tasi <<
As a result of skyrocketing energy prices and the war going on next door, the willingness to borrow has recently decreased. The question arises as to whether it is worth taking out a loan now, and what to expect.
I talked about this with Csaba Tasi, a financier and financial planner.
Everything you wanted to know about borrowing in 2022 in a detailed interview.
What do people buy real estate from? What is the general trend now?
Most buyers buy a new, typically larger apartment or house from the sale of their own property. The existing amount is often supplemented with a loan. There are still a large number of cash buyers on the market - many are trying to mitigate the impact of inflation by buying real estate. The number of foreign buyers has increased, but at the same time, the number of Hungarian investment purchases has decreased somewhat in the recent period.
There are many types of loans. What type of loan is a home loan?
There are many types of loans. What type of loan is a home loan? The exact name of the loan referred to colloquially as a home loan is a mortgage loan for the purpose of purchasing a home. The bottom line is that the bank considers the property you want to buy as collateral, which is also entered on the property sheet. Simply put: if the debtor does not pay the loan (for a long time), the disbursing financial institution enforces its mortgage, that is, the property may be auctioned during an execution procedure.
There are several types of home mortgages. It can mean the purchase of an apartment or plot of land, construction, renovation and expansion, but the exchange of an apartment or the change of an existing loan to a more favorable construction also belongs to this category.
What is JTM and why is it crucial when you are facing a loan application?
The purpose of the JTM (Income-Proportional Installment Indicator) is to prevent the population from taking on too much credit. The government decree determines in % form how much of the income can be used for credit debt.
The increased installments in 2022 narrow the options somewhat. Using an everyday example:
You have an income of HUF 300,000, of which, according to JTM, 35% can be debited for a loan (variable interest rate every 5-9 years). This means that a monthly HUF 100,000 plan will still fit (or not). Previously, borrowing was done with an interest rate of around 3%, which is now approx. rose to 8%. Due to the higher interest rate, your installment will also increase. So you can no longer borrow as much (in our example, only 13 million instead of 20 million) or you need to think about a longer term.
When determining JTM, all existing loans must be taken into account. This includes personal loans (e.g. electronic devices bought on credit, i.e. even a laptop or a washing machine), other loans (e.g. babysitting), even credit cards and current account credit lines are included in the calculation. In the latter case, 5% of the budget is considered a regular monthly expense.
Is it worth using an online loan calculator?
The online calculation can be a useful starting point for taking out a loan. However, things change quickly and there is a lot of information that needs to be available in order to choose the right construction. Preliminary information is important, but at the same time, every case is different, there are always unique aspects and life situations that make it worthwhile to contact a credit expert. If you complete the online calculation before this, you can ask your questions in a prepared and targeted manner.
As a layman, it is easy to get lost in the maze of home loans. Loans with much lower installments in the first 12 months have recently reappeared. It's a tempting offer, but overall you're worse off, since you'll pay back a higher amount at the end of the term. This can be useful for those who can't cope with a higher installment yet, but know that in 1 year they will get a larger sum of money or their income will increase.
What is the credit rating based on?
Should we request an offer from one or more banks?
The so-called scoring system designed to assess creditworthiness indicates to the financial institution the probability of insolvency. This is essentially the quantification of credit risk using mathematical methods, based on existing data.
The information and aspects taken into account are very similar for each bank, but there may be minor differences (e.g. how much is your income (and what counts as it), do you own your own property, is your spouse on GYES/GYED...etc. .)
The KHR (Central Credit Information System) also provides enormous help to banks in assessing their creditworthiness. This includes the applicant's positive (or even negative) credit history, previous and existing debts are included in the register.
All in all, it can be said that you have to try to get a loan from several banks, because it is possible that they judge your creditworthiness based on different factors, which can be avoided if you ask for the help of a professional. For example, adobe houses are rejected by many financial institutions, while in others they can be used as collateral.
How does the change in utilities affect the real estate market, and thus mortgage loans?
It is now much more difficult to sell properties with outdated energy systems (for example, without thermal insulation, with high ceilings). In order for such a house to become energy efficient, quite a lot of money must be spent on renovation. If this does not happen, the price will almost certainly have to be reduced.
Due to the new utility bill, the market was transformed, and a new type of investor appeared. These are buyers who acquire non-modern energy-classified properties at a favorable price, and then carry out the necessary modernization for up to several (ten) million forints.
Although bank loans have become more expensive, state subsidies are still available. There is a group of people who are waiting to take out a loan, waiting for what the future will bring. In addition to inflation of 15-20%, an interest rate of around 8-9% can still be considered favorable. Many people do not know that if inflation and interest rates decrease in the future, it will be possible to exchange the existing loan for a more favorable one - so this does not represent a serious risk either.
How do interest rates develop during inflation?
Even though the central bank base rate is already 13.0%, loan rates are still around 8-9%. This is an interesting phenomenon, because loan interest rates are basically determined by the central bank base rate. At the same time, this is not an automatic process, and the change is often only noticeable with a delay. The relatively low loan interest rates are also due to the competitive situation between financial institutions, as banks do not want to lose customers.
It is true that the conditions have become stricter and the installments have increased, but in the long term it is still worth taking out a loan.