Here are some of the exciting behind-the-scenes secrets of 10 banks’ lending practices. First, I will look at the factors determining the optimal and maximum amount of credit, the income and the hedging side. The second article will discuss the discounts available to banks and me as an intermediary, the maturity and interest period, and other important aspects of bank selection.
Many times, even my best-rated debtors are worried about their creditworthiness. And this is partly because we know little about bank practices and partly because buying / building / renovating a property is a major financial decision for most people. A deposit must be made which, in principle, will not be refunded if the full purchase price is not met. Not even one of my loan applications was rejected because, in the light of my banking practice, I usually submit credit applications in advance. Retail bank lending is highly standardized. Based on many transactions with different characteristics, statistical models are used to determine with certainty whether a customer will be problematic or not. Based on these, the safest cases were categorized by several banks along some parameters. Thus, for certain transactions, it is up to the branch credit supervisor to decide, and in that case the assessment time can be up to 5 working days. In other cases, when your bank’s central risk management system thoroughly reviews your application, you will have a few weeks to review.
How are banks rated?
There are two methods: in the first case, you decide whether or not you are creditworthy, which is how most banks operate (Lucapest Bank, CEB, Ernie, FFB, OPT, Sharemore Bank and Unioncred Bank). In the second case, apart from creditworthiness, debtors are rated on a scale based on the loan repayment behavior of their similar clients and offer better terms to “better” debtors (Konsume, MMB Bank). Of course, every bank asks everyone for a lot of information, personal information, workplace, bank account turnover, collateral, bank relationships, and I could go on. Clients sometimes joke about asking for their height.
As a general rule, those with above-average income may want to pay special attention to MMB and Konsume offers. Fortunately, however, competition between banks is very strong now, and the first group of banks often give such a high discount that it is ultimately worthwhile to choose them from a financial point of view.
How much self-sufficiency is needed? What is the value of the cover?
In the case of mortgage loans, the banks guarantee in the event of default that the encumbrance of the property being pledged is foreclosed and foreclosed. In exchange, they offer much more favorable interest rates than other retail loans, just think of the interest rates on non-mortgage personal loans.
It is statutory that a collateral may be debited up to 80% of the market value estimated by the bank. CSOK and other state subsidies are not considered a burden. In an optimal case, banks are willing to lend at half the estimated value of the bank, but they go up to the legal maximum, and even with the help of additional collateral, even the full purchase price can be financed. (For self-sufficiency, many banks have the classic bridging loan that can be used to secure a mortgage loan before buying a property).
There are banks that can ask for a preliminary valuation free of charge, which can be very useful for a construction or purchase, and some that can only be ordered at the time of application. The fee is in the order of 30-40 thousand HUF. But there are banks that ask for money even if the deal is not realized.
Burdens / situations to avoid
It is important for the bank to truly enforce its rights when needed. That is why, among other things, he does not like to have legal relationships (eg, undivided joint ownership or pre-emption right signed by a lawyer), to have no access to the property (eg, private road to the property, no ownership of the property), there have been changes to the property which have not been granted a building permit and are therefore not subject to deregistration. The building should be habitable (ceiling height of 220 cm is also required in many cases) and home insurance may be required (here adobe / mixed masonry is critical). For condominiums, be sub-standard. In many cases, these are also in the best interest of the prospective owner, unless the bank draws attention to it. We can say that these bank financing processes also have a legal purifying effect.
What’s acceptable as collateral
A flat, a picked yard, and a dwelling house are, in most cases, yes, but for some banks, commercial real estate at the other end of the scale is acceptable. The range of eligible collateral and the extent to which it is accepted can vary by loan purpose and loan product, so it is quite different from a freelance mortgage at a renovation, but it is also stricter than government-sponsored and in some cases consumer-friendly loans.
There are very sharing collateral, luckily I have a software that can see the requirements of all contracted banks for collateral, income and many more. A little taste of diversity.