When I was still at the university, I thought that I would never take any loan. I will save and buy with my honestly earned money and will not owe any uncle. The very feeling of being indebted to someone was unpleasant to me, so I considered it absurd to take loans for such long periods and large amounts. I wanted to feel free.
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But how things change. The first time I went to the bank and started to delve into the system, a month later I calculated a good business case. Two months later I informed my parents about the decision to become a debtor on my first home loan. The worldview has completely changed for many reasons:
At first
I started getting involved in loans in terms of investments rather than buying something for myself. This is an opportunity to get leverage for increasing finances and a source of income in the future, especially in a growing market. After all, the real estate market is more inert to financial shocks even in bad times, such as now.
Secondly
The price of money. If we consider in the micro version, speaking about ourselves, then let's be honest, who will give you from enterprises or individuals money in the amount of, for example, 100 euros for 000 years or 30 for 50 years? The payments are so tiny that inflation itself eats up all bank commissions/interests. For example, your fixed loan payment is 000 euros. Think, in 5 years it will be the same money that was when taking a loan? In the macro version, when we talk about large banks, this is indeed profitable, since the number of such transactions and guaranteed financial flows make it a profitable model.
Thirdly
Even among bank employees, I often heard the following arguments: "that real estate is too expensive, in Spain you can buy 2 times cheaper", "I'm waiting for this whole soap bubble to burst." They said this 5 years ago and nothing has changed since then. And real estate has become more expensive. Especially now, look at how easily and in what quantities “extra” money is poured into the economy, thereby depreciating it again. What the truth has value grows in value. And expecting a "better" time to invest makes almost no sense when buying a property.
Fourthly
I heard statements among people that I want to be mobile. To take it and go to live in another country tomorrow and I don't want to be burdened by anything. I sold real estate for 2 weeks and had a good financial cushion to move to other countries. For this reason, their arguments are not at all clear to me.
Thus, I leaned to the dark side and believe that this is one of the best financial inventions of mankind. This is an opportunity for young people to break through higher and live a full life without being constrained by frames.
P.S. All of the above applies exclusively to the Estonian region and loans, whose rate is not more than 4% per annum. Please forget about mogo, hüpoteeklaen and the like.
About home loan rates
Let's also tell you what loan rates I consider good and what rates are offered by various banks. But before you continue, please write a comment after reading. Firstly, I see your reaction and get unearthly pleasure, and secondly, you help the blog grow and write new articles with new zeal.
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If you have already come to the conclusion that you are going to take a home loan and buy an apartment, then I would definitely advise you to make a preliminary round of all banks even before you go to choose something. Submit a preliminary application for any apartment that theoretically suits you. If you are wondering how much will they give you? Then you have 2 ways to find out this information. Either talk to one of the haldurs in swedbank or seb, or just try your "luck" when sending a petition. The latter certainly saves a lot of time and leaves your body at home, without you dragging it to the office unnecessarily. In order for you to understand the procedure, I will tell you the following information, if you do not have a single loan and you earn 1500 euros, then you can approximately receive up to 100 euros of credit money (but it still depends very much on the bank where you ask).
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After sending the application, haldur will contact you and most likely make an offer or clarify the details. Sometimes they do it orally (so that other banks do not have the opportunity to send to receive a competitive offer), sometimes they still send it by mail. But I strongly recommend that you send applications to at least LHV, Swedbank, SEB, COOP, Luminor. Getting loans is a normal market and you are a participant in it, which means that banks are also fighting for you to some extent. Having received all offers from banks, you will be able to compare them and ask some banks for better offers, since you are sent preliminary and very first offers.
Potential barriers to taking out a loan
Here I will make a small digression. Many people ask about transactions in the statement by type: what if I played in a casino? Or received an SMS credit? Or played the lottery. Let's just say that it is certainly better that there were no transactions in the casino over the past half a year. But if it's only 1-2 transactions for half a year, then it's okay. You can submit a loan application. If these transactions are systematic and you played every month, then, alas, you are unlikely to get a loan. You will have to come to terms with this. This also applies to SMS credits, it is better for you to indicate the balance on them in the application, and if you have paid, then you are “clean”. Playing the lottery is not interested in banks from the word at all.
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Let's get back to the topic. Have you received offers, what rates are considered adequate? I received 1,2% per annum, as well as 1.5% and the last 2.5% and these rates are absolutely adequate. It is worth mentioning here that everything is very individual. Depends on your ability to pay and on loans already taken. I will not consider mortgage loans in this post, since this is a completely different story, but at a minimum, I consider mortgage and housing loans to be the best inventions of mankind. Especially in the European Union.
Next Steps
And now, for example, you have withdrawn 2% from the LHV bank, what else can be done? The fact is that for everyone there is still a fee for the contract and it can be “cancelled”. Banks are ready to make concessions for customers and you can demand its cancellation. By the way, it is the smallest in LHV.
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What happens next? In fact, you have always communicated simply with the loan officer / haldur. He sent you offers based on internal banking procedures. But after your confirmation, the credit committee goes on. It is on it that your fate of obtaining a loan is decided, it is also possible that the committee will require changes in the conditions. So sometimes it's better to get a decision from the credit committee before you spend a lot of time choosing apartments, but this is not absolutely necessary.
Don't forget to read our Article about financial freedom through real estate.