For most people, a mortgage is the biggest commitment of their life, so it pays to know how the whole process works. Here is an overview of the steps, from the first calculation to drawing the loan.
1. Find out how much you can borrow
When assessing an application, the bank looks mainly at your net income, expenses and existing liabilities (loans, credit cards, authorized overdrafts). From this it determines what payment is still sustainable for you. That is why it is a good idea to run the numbers before you start looking for a property. You can calculate an approximate payment in the mortgage calculator.
2. Add up your own funds
Banks commonly lend up to 80% of the property value; the rest must come from your own funds. Banks may also provide a loan above this limit, but only for a limited share of their loans and often at a higher rate. The National Bank of Slovakia is preparing a rule change that should make it easier for people under 35 to buy their first home. The change is not yet in force, so always ask about the current conditions.
Besides the price of the property, also budget for other costs: fees for registration in the land register (cadastre), an appraisal for the bank, property insurance, and possibly a loan processing fee.
3. Get your loan pre-approved
Pre-approval is a non-binding assessment of how much the bank might lend you. It is not yet an approved loan, but it gives you confidence when searching and negotiating. Sellers and real estate agents then take your interest more seriously.
4. Choose a property and agree with the seller
Once you find a suitable apartment or house, a reservation agreement is usually concluded and a reservation fee is paid. Read the reservation terms carefully, especially what happens if the bank ultimately does not approve your loan.
5. Submit your mortgage application
The bank requires documents proving your income and identity. Employees usually provide a confirmation of income, and self-employed people a tax return. The bank also commissions an appraisal to determine the value of the property. That is why it makes sense to submit the application as early as possible.
6. Approval and signing the contract
After approval, you receive the loan agreement, which sets out the rate, fixation period, payment and fees. Things worth a closer look: how long the fixation lasts, what happens after it ends, what the early repayment fees are, and whether insurance is included in the price.
7. Purchase contract and registration in the land register
Together with the purchase contract, a pledge agreement is also signed, by which you pledge the property in favor of the bank. Subsequently, an application for registration of the ownership right and the bank's pledge right is submitted to the land register.
8. Loan drawdown
The bank pays out the loan to the seller only after the conditions are met, for example after the pledge right has been registered in the land register. With escrow (úschova) of the purchase price, the money is released once the agreed conditions are met. Only then is the property handed over.
What to check so nothing surprises you
- what all the fees are besides interest,
- how long the fixation period lasts and what the payment will look like after it ends,
- what happens if your income drops or your situation changes,
- whether you can repay the loan early and under what conditions.
Why arrange a mortgage through an advisor
Every bank offers slightly different terms. A financial advisor compares several offers at once and helps you choose the one that suits you. At our agency, our financial advisor Juraj Poliak will help you with your mortgage, with no obligation and free of charge. See how he can help you.
