Investors, who have Polish mortgages in Swiss francs (CHF) in Poland, may have had a few sleepless nights recently.

The weak Polish zloty combined with falling property prices translates into LTVs often exceeding the value of the property, which in the long-term (and mortgages are long-term loans) may not have any significance, but in the present can create quite a headache.

The threat is that the majority of the mortgage contracts have a clause saying that if the value of mortgage collateral or the property's value falls dramatically, the bank has a right to ask for additional collateral or change the currency of the loan.

While there's really nothing a mortgagee can do about it, banks have been at pains to point out that, in reality, so long as repayments are not made on time, they won't execute the clause.

But this week we've seen this unwritten agreement between banks and clients has been broken.

There's evidence that so far three banks (Polbank, Noble Bank/ Metrobank and Santander) have been asking clients paying on time to re-negotiate contracts.

This has taken various forms: from asking for another property to be pledged, a higher margin on a loan by 0.5%, additional insurance of the loan, to immediate re-payment of the amount of money that exceeds the value of the property.

If a client doesn't accept the new requirements, banks threaten to end a contract.

And, while it appears that banks are executing their rights stated in contracts, if we take a closer look, it appears that banks are trying to take advantage of clients and use exchange rates fluctuations as an excuse.

The clause in these contracts was actually designed to relate to a dramatic fall in the value of property, something that hasn't happened. In addition, with off plan units, finish adds significant value, which is always taken into account by property valuers.

So, these clauses are now being invoked in relation to a fall in the value of the PLN in relation to CHF, rather than anything to do with the declining value of property.

The Financial Controlling Commission (KNF), regulatory and supervisory body, clearly states that a decline of mortgage collateral doesn't mean that a client's creditworthiness has dropped.

The body is defending CHF mortgagees and has said that banks should not be using CHF exchange rates to increase the cost of mortgages. KNF warns banks that such requirements could be seen as bad risk management and force the KNF to take action against banks.

The view expressed by KNF is shared by the Office of Competition and Consumer Protection (UOKiK), which is taking BRE Bank to court. UOKiK questions some clauses in mortgage contracts that state that the bank can change some terms and conditions and require clients to inform banks about any changes in their financial situation.

UOKiK says that it will take more banks to court before Easter, but doesn't say which banks are on its list.

The fast and prompt response from controlling bodies is good news for those people who were or will be asked to re-negotiate mortgage contracts. It seems that at the moment, the reaction from KNF and UOKiK is the best card that could be played in talks with banks.

But what should an investor do if they find a bank is making such a request?

Firstly, check contracts to see on what basis a bank is demanding changes. Secondly, a client should demand a new property valuation from the bank or hire a valuer on their own. Anyone who bought off-plan should produce the bills they paid for finishing an apartment.

It doesn't appear that this saga is about to be concluded, so we'll keep you posted as the situation develops.

The recent depreciation of the Polish zloty has hit hard all investors who have mortgages in Poland in Swiss francs (CHF). Their monthly repayments have increased significantly as a result of the fluctuations in the exchange rate.

Moreover, we expect the currency trend to continue at least in the short term. This is mainly because of the growing account deficit, the expected slow down in Polish exports and FDI inflow.

Investors, who are greatly concerned about further exchange rate movements, may want to consider a new mortgage plan from Noble Bank for its existing customers.

The proposition is about setting a maximum monthly repayment for the next 2 years. The maximum monthly repayment is calculated at a preferential exchange rate (currently Noble's exchange rate is 1CHF= PLN2.5 rather than the official exchange rate of 2.84).

That means that in a situation where the monthly installment calculated at the current exchange rate turns out to be lower than the set maximum repayment, a client pays the lower rate.

On the other side, when the installment turns to be higher than the set maximum, the client pays only the maximum and the remaining amount is suspended at zero interest and added to the capital owed after 2 years.

The fee for the arrangement above is 5.45%, calculated on the total amount of loan and this can be added to the existing mortgage.

Such a solution, in broker Jakub Król's opinion is beneficial:

'Such an arrangement should help you to plan and manage your budget at home plus, more importantly, it will allow your cash flow to match your rental income from Polish apartments.'

Additionally, if a client decides to go for this offer, the CHF Libor rate would be corrected to 0.61%, which will lower the interest rate on his/ her mortgage. The current Libor rate in Noble Bank is 2.56% and is going to be revised in March.

The Libor is decreasing as a result of the Bank of Switzerland cutting the base rate in the last few months, but banks revise their rates usually every quarter.

The lower interest rate can obviously partially cover the depreciation of the Polish zloty against the Swiss franc.

Anyone looking at this kind of mortgage would need to consider the numbers carefully, as the fee of 5.45% of the total loan may well considerably outweigh the value of deferring a proportion of the repayments over the two year period.

For example, with the gap between the exchange rate of 2.8PLN to 1CHF on offer at present and with the capped rate of 2.5 from Noble above, you would be deferring about 10% of each payment.

On a 25 year CHF100,000 mortgage at 5.5% the monthly repayment would be around CHF600. So, you would be paying a CHF5,450 fee to delay payment of ~CHF60 per month - roughly equivalent to borrowing CHF1,440 and paying interest of CHF5,450.

This offer could be obtained only through Jakub Król, so if you're interested or want more details please contact Jakub: Jakub.Krol@noblebank.pl

We have been inundated lately with questions from investors about the effect of the Credit Crunch on the mortgage market in Central & Eastern Europe.

At the same time, rumour and misinformation has led to a heightened level of concern from those who have invested in off-plan property in the region.

To address this, we have been investigating exactly what is - and isn't - available in the markets in which Property Secrets has offered investment opportunities - and from whom.

Here's the definitive breakdown of current conditions:

Poland

Currently, Raiffiesen Bank have stated they will be pulling lending to non-Polish residents. There is no indication of when this decision might be reversed.

Both Noble Bank and PKO Bank are still offering mortgage products to non-residents, however, and Property Secrets clients are currently using the London branch of PKO.

Czech & Slovak Republics

The Credit Crunch does not currently seem to be affecting the Czech market at all and this, it seems, is down to the fact that non-resident loans currently account for just 3% of overall bank lending in the country.

Again, the Slovak mortgage market appears equally unaffected with banks still willing to lend to non-residents.

Bulgaria

The latest information we have from Bulgaria is that there are currently no issues with lending to non-residents and we have an agreement in place that should this look like changing we will be informed immediately.

Incidentally, we have had a number of queries from clients regarding the fees charged by our recommended partner Bulgarian Home Loans. We asked them to respond and explain their charges.

You can download their in-depth response here: Bulgarian Home Loans Fees Explained

Romania

Due to Regulation 11, imposed by the Romanian National Bank, commercial banks had to re-submit their credit norms at this same National Bank. One by one the Romanian National Bank has been signing off the approval of each bank's credit regulations since the beginning of October, and in only one particular case a certain Romanian bank has decided to put on hold non-resident financing. This, of course, does not mean other commercial banks will do the same, and we are awaiting the newly approved credit regulations of other Romanian banks who will include non-resident financing

We have been in constant talks with our partners on the ground, as well as several banks, and there is good news on the way.

New credit norms will be issued by the Romanian National Bank this month and banks are already preparing new lending criteria and products. We will have all the details later this week and will announce them as soon as they come in.

In the meantime, we have been looking at additional brokers as recommended by our members. The feedback we're getting is positive and we're moving in the right direction with these brokers. We'll update you as soon as we can on this too.

In the meantime, please feel free to call us with any questions regarding finance you may have.

Property Secrets member Neil H started a running post on our forums late last year on his experience of applying for a mortgage in Poland.

This was to fund his investment in the Piastow development in Katowice, Poland.

His series of posts turned into an excellent resource for others investing in Poland and applying for a mortgage.

The development ran over by a month, much to Neil's joy as it gave him an extra few weeks to complete the mortgage application process.

Neil felt that allowing six months for the mortgage process was giving himself sufficient time but the reality was very different.

Here's what Neil wrote:

I started off the mortgage application in mid September when I filled in initial assessment documents and returned then to Jakub Krol at Open Finance/Noble Bank and Anna Zuber at Rednet.

On the 15th October and still in the process of filling out the application forms having queried some of the terms on the forms with Noble Bank and Rednet, I commented on the forum that I believed turnaround times were getting better now re mortgage applications. Hindsight is a great thing!

The month of November was spent collecting documents. Jakub is filling out the blanks on the application forms and Anna is doing the same - having suggested I forward a copy of the PPC (preliminary purchase contract).

I was worried about sending all the original documents away and it also prevented me from applying to another bank in the meantime. Had hoped to send these away by the end of the month but didn't end up sending them until mid December.

23rd December Jakub received my application but requested more up to date payslips and bank statements as it took me so long to gather the relevant information that the latest ones were a month or so old now.

Anna Zuber from Rednet has requested the same documents with my application but this is hard to do as they are now with Jakub and replicas are expensive to retrieve!

By January 11th, I still had not got all updated documents to Jakub, thanks to the Christmas holidays and delays in getting documents and I am not starting to worry about only having a couple more months to get this sorted. I finally get these out by the end of the month and Michal Jezewski is now dealing with my application and appears confident I can meet the beginning of March deadline for the first stage payment.

At the start of February, Michal informs me I need a Polish address and POA in place BEFORE they can make a mortgage offer to me. I wasn't aware of this detail and asked him for a recommendation for a local solicitor to provide this.

I get a positive loan decision from Noble Bank on the 19th February at 80% LTV and a rate of 6.6% dropping 1% when the property is handed over.

Getting the solicitor is a delay I could have done without.

By the end of February I've engaged a solicitor and had to go to Dublin to get the POA notarised and apostilled as my local notary advised that the UK foreign office might take 3 weeks to do the apostille. I did the lot in a couple of hours for €100euro total and posted it off.

The next hurdle was to pay the solicitor which turned into a nightmare and was down to the wire.

The Polish solicitor received payment and was in touch with Noble in time for the official transfer date although the solicitor didn't seem to think a few days here or there would be a problem.

The last step was getting an account with Noble Bank to transfer initial funds into.

The offer I received from Noble was the following:
Interest rate: 5.66 %
Interest in a bridging period: 6.66 % (before the bank's mortgage is written in a mortgage book of a property; interest rate is higher in this period due to higher interest rate)
LTV net 80 %
Currency CHF
Repayment period: 360 months

My solicitor signed the agreement on the 11th, so I was only over the deadline by 5 days.

I was pleased to have finally got to the end of the process...I have another 2 investments coming up in Bratislava and Krakow and hope these work out ok and don't take as long!

Neil shared the entire experience with us on the forums to highlight some of the things fellow investors need to look out for. He concluded with some key points:

Neil had intended to apply to 3 lenders, however he ended up applying to only one.

This was because he had to send original documents to each lender and it is costly to request certified copies.

Most of these documents are only valid for a month and by the time lenders get back to you most documents have expired and are not valid. One of the key things is to gather the documents in time.

Also, allow for the time spent posting the docs - couriers are expensive and might not be an option.

After receiving an offer from Noble Neil then had to provide them with an address and solicitor. For this he had to make a trip to Dublin to the local notary, then to the foreign office. Again, this was time-consuming and was not something he had planned for. You need to allow time to go through the process.

Neil's advice then is: Get your paperwork organised in advance, before you apply. Put everything in order - make sure NO pages are missing.

Bank statements should be for at least 3-6 months. Check with your bank as requesting certified copies of statements can cost money.

Know exactly what documents are required and if there is an expiry time on documents, for example, does a statement of net worth need to be valid within the last 3 months.

If certain documents expire within a month - then plan ahead and make sure this is the last document you arrange. This might sound obvious but it is very easy to get caught out.

When dealing with the mortgage broker, or going directly to the bank, make sure you are the one calling them. You need to be foremost in their minds - although Noble Bank were very good and he has no criticisms of them, you need to call them and don't wait for them to call you.

Try and do as much as you can while waiting for the offer so you can move straight away when you receive the offer.

Things you can do include finding a solicitor, for instance. This is to provide you with an address when accepting the mortgage. You need time to shop around and get a good solicitor - Neil only left himself a week to find one, give power of attorney and transfer a euro fee!

Be aware of POA's and apostils - these cost money and you need to budget for these.

When you receive a mortgage offer you will need a bank account already set up and money in the account. Noble Bank did this for Neil, but he advises otheres to check in advance.