Home loan – the most important issues step by step

Many people dream of having their own home, but only a few can afford to buy or build a home with their own money. Banks that offer mortgage loans for the purchase of plots and construction of a house, as well as for the purchase of a ready-to-live-in house come to the rescue. In the article below we will focus on buying a plot and building a house.


Step 1: Mortgage Calculator – Count which loan you can afford

Step 1: Mortgage Calculator - Count which loan you can afford

The first and obvious step is to check what credit you can afford. It may turn out that despite high earnings, banks will be willing to borrow less than you need. Otherwise, it may turn out that the installment of the future loan will be too burdensome for you and it will be better to borrow less than you planned.

Credit calculator

To calculate your maximum credit worthiness, you should use the online ability calculator. You’ll find out how much money you can get. But high creditworthiness at one bank does not mean that other banks will be equally generous. Treat the result as an approximate value, not a final offer.

Loan installment calculator

If you already know if your bank will be willing to lend you as much as you need, it is worth checking what the mortgage rate will be. Online loan installment calculators also come in handy. If it turns out that the loan installment is too high and you do not want to spend so much, consider taking a lower mortgage.


Step 2: first a loan for a construction plot

building  loan

If you don’t have a construction plot, buying it is the obvious first step to making your dream of building your own home a reality. Fortunately, many banks offer mortgage loans for the purchase of construction plots.

Two mortgages

It is worth separating the loan for a plot from a construction loan, because rarely at the stage of searching and buying a plot we are able to meet the formalities necessary to obtain money for building a house. This means that you can take a loan only for the purchase of a plot of land, and then another for building a house on this plot.

Own contribution is needed

According to the regulations, the minimum own contribution is 20% of the plot value. However, exceptions to this rule are possible and the own contribution required will be lower. If the price of the plot is significantly lower than its market value, the bank may lower its own contribution requirements.


Step 3: loan for building a house

Step 3: loan for building a house

If you already have a construction plot, it’s time to get ready to apply for a construction loan. There are several issues that should be considered at the very beginning so that the implementation of the plans goes smoothly.

Basic mortgage documents

Identity documents, employer certification or company documents for self-employed persons are required for each mortgage. We also need to certify the income in the form of bank statements or PIT declarations.

Plot and house construction documents

You will need to attach a number of plot and construction documents to your loan application. From the bank you will get an exact list of documents, which will most likely include:

  • current excerpt from the land and mortgage register,
  • a document confirming the right to a plot, i.e. a purchase agreement or other confirmation of ownership,
  • excerpt from the land register specifying the status of the plot,
  • decision on building and land development conditions,
  • final decision on the building permit,
  • log building,
  • construction project along with the valuation and construction schedule.


Step 4: from submitting the application to payment of money for construction

building loan

Submission of a mortgage application

When you complete all the documents, you will be able to submit applications to several banks and wait for the loan decision. Do not limit yourself to one or two banks. Applications are usually submitted to three banks offering the best conditions for our case. Importantly, submitting the application does not oblige you to take out a loan yet.

Credit Decision

You will receive a response from the banks within a maximum of 21 days. In the event of a positive credit decision, you will receive a proposal for the terms of the loan, i.e. primarily its interest rate. If the answer is negative, the bank must justify its decision and you can appeal it.

Contract signing and loan disbursement in tranches

After receiving a positive decision from the bank, you can sign the contract and wait for the payment. Remember that the money will be paid out in tranches, and the bank should periodically check that you are using it according to the construction plan and schedule. If this is the case, you will receive further tranches anyway until the entire amount you have applied for is disbursed.