August 28, 2019

Mortgage loan for the purchase of a plot

Many people dream of putting their own house outside the city, whose construction they will supervise from its beginning to the very end. The purchase of a plot of land for development is, of course, a huge expense, which often exceeds the savings accumulated over the years. However, there is a way to not have to give up many years of dreams.

In this situation, it is worth considering taking a loan that will make this dream come true, buy a plot of land and start building a house. Such a loan is often a step closer to fulfilling the dream of owning your own home. A person whose life and financial situation is stable, can start applying for a loan, which he can use to purchase a selected plot.
It is good to know what documents are needed to obtain a mortgage for the purchase of a plot. Banks usually require specific documents before they can be granted. Of course, first of all you need to confirm the status of the plot you want to buy – it must necessarily be a construction plot, that is, the area intended for development.

The first of the documents that should be delivered to the bank in which we want to apply for a loan is an excerpt from the Land and Mortgage Register, which is kept for a given property or, depending on the case, an extract from the Land and Mortgage Register may be required, from which the property for which we want to obtain a loan will be extracted. Then you may need a notarial deed of sale. If it has not been signed yet, you may need a pre-sale contract.

Housing on a given plot

Housing on a given plot

If the basis for the purchase of a given property was a donation agreement, then it should also be prepared before visiting the bank and applying for a loan. One should not forget about the document, which confirms the fact that this area was intended for single-family housing. This means that a certificate of intended use should be prepared in the current land use plan. In another case, it is also mandatory to provide the bank with decisions on building and land development conditions, which confirms that it is possible to build single-family housing on a given plot. You cannot forget about an excerpt from the land register. Before visiting the bank, you should also prepare a copy of the cadastral map.

The mere laborious preparation of documents, however, will not be enough to get a loan to buy a plot. Unfortunately, people who need such a loan will not receive it in every bank. Some of the banks do not even recognize such collateral in the form of a construction plot. It also happens that, if the plot itself is to be a collateral for the granted loan, banks demand a much higher own contribution.
However, it is also worth explaining the notion of own contribution. Own contribution can be defined as the borrower’s share in financing the purchase.

Non-own insurance

Non-own insurance

In the case of a loan for the purchase of a housing plot, a very large down payment is sometimes required – it can reach up to forty percent in such a property. Many banks often credit the purchase of a plot of land in the amount of less than the value of the plot – for example, in fifty, sixty, seventy or eighty percent. This difference is a kind of own contribution. Of course, it is worth remembering that it is possible to obtain a loan of 100% of the plot value. what does it mean? In short, it means that the bank secures the repayment of the loan with this amount when there is no own contribution.

However, this requires an additional fee. This fee is also known as non-own insurance. Such a premium is usually paid in advance for a period of three to five years. Fortunately, such an additional fee is recoverable, but only if the borrower makes an own contribution in the appropriate period, which will be equal to the required overpayment of the loan. Otherwise, you must pay the next premium. There is also another way to get a 100% loan for the purchase of a construction plot.

This can also be done by securing this plot with another property. A loan for the purchase of a plot of land is usually granted on the same terms as housing loans. However, the loan for the purchase of a construction plot usually bears the same interest as a mortgage. Such a loan can be taken for up to thirty-five years. 

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