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100% LTV in Poland? - But Buyer Beware!

We were contacted by a broker the other day offering to source 100% LTV mortgages for PS clients.

It's not the first time we've had such offers, and we certainly know that 100% LTVs are out there - although they are extremely hard to find nowadays. The question is: are they worth looking for!

So, it's not the first time either that we've said 'Thanks, but no thanks!'

There's a simple reason for this and it's the old one about 'If it seems too good to be true, then it almost certainly is!'

Banks aren't stupid - well, not generally! And they are certainly not going to provide 100% finance to a foreigner without a whole string of measures to ensure their risk is minimised. After ll, there's little to stop a borrower simply walking away from a 100% loan and they lose virtually nothing - the default won't even show on a UK credit search.

That's why these 100% loans almost always turn out to be little more than headline grabbers with little real advantage to the borrower.

And, in the past, we've found that people can often realise this too late.

Here's why.

You have, say, a very nice 10% down deal. Then, when it comes to putting down your 90% at the time of completion, your broker arranges for the drawdown on the mortgage. It's at this point that you realise the 100% mortgage is based on the price stated in your contract. It doesn't include the costs of a kitchen and the white finish!

That's going to make the 100% - with all its extra safeguards, riders and high cost - look a little sickly alongside a straightforward 85% LTV loan from, say, Noble Bank, that DOES include the cost of kitchens and white finish.

There are other disadvantages, too.

The last time we had clients applying for 100% loans, it was a total nightmare!

Let's face it, the mortgage process is hard enough in Poland as it is, just for a standard LTV advance. Imagine those bureaucratic hurdles doubled or trebled for a 100% loan and you'll get some idea why clients were tearing their hair out - that is if they had any left by the end of the process!

The bottom line is this - such LTVs are still there, I'm sure, but you are going to have to work very hard to find one; and, in my experience, when you get down to the nitty gritty - never mind what the headline LTV says - the reality is that it's never that simple. Plus, it usually isn't actually to your advantage to go for 100% LTV anyway.

And, on a personal note, I'd always advise against over-leveraging.

The alternative is far better - go for a manageable, and standard 85% LTV and include your kitchen and white finish. AND then - now that refinancing is no problem in Poland - a year down the road, refinance your property and release some of the capital growth you've seen - and reinvest it.

A less dynamic and slower approach, maybe. But it has the great advantage of avoiding over-stretch AND nasty surprises when a product fails to do what you believed it said on the tin!

Debbie Le Goff Head of Legal and Business Affairs

POSTED BY ROBIN BOWMAN ON WED 17TH OCTOBER AT 11:14 GMT

TAGS: Poland Property, Financing & Mortgages, Polish Mortgages, LTV

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