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Every year 130-150 thousand families buy and buy a unique apartment in Hungary, last year Duna House estimated that 131 thousand housing transactions took place. Among buyers, typically 20 to 25 percent of those who buy their first home exchange, with the remaining 75 to 80 percent trading one existing home for another.
Thus, 100-120 thousand buyers a year struggle to financially coordinate the date of sale and purchase, for example, so as not to lose the amount of the sale of the old apartment at the time of payment of the purchase price of the new apartment.
This, of course, mostly happens when someone tears down a new apartment they like before selling or even advertising their old apartment. There are usually two cases:
- The deductible available (usually financial savings), either alone or in addition to a normal mortgage loan, is enough to buy a new house: in this case there is no particular problem, the sale price of the old house can even wait, and with its arrival there are significant savings. A mortgage loan taken out for an apartment can also be partially prepaid (in rare cases, if someone moves to a cheaper apartment, it can be repaid in full).
- The situation is more complicated if the buyer does not have enough capital to buy a new house, and even when it is complemented with credit, he does not have enough funds to buy, because banks do not give enough credit to buy only on credit.
The MNB’s debt brake rules only allow mortgage borrowers to borrow up to 80% of the market value of the hedging property, and it is not possible to obtain a home loan for a larger amount. Internal bank regulations may also consider a stricter credit guarantee value as a credit limit.
The uniform rule prescribed by the MNB is the loan-to-value (HFM) rule, which maximizes the amount of the mortgage loan that can be obtained at 80 percent of the market value of the collateral. Another important element of the regulation of the MNB debt brake since 2015 (MNB Decree No. 32/2014) is the index of quotas related to income (JTM), which limits excessive indebtedness in proportion to income. HFM primarily protects banks in the event of insolvency and JTM protects clients from insolvency due to an overdraft. The current maximum values can be found in our table below.
In principle, several escape routes are possible while still respecting the debt brake rules:
- loans for self-sufficiency: this can be done with private loans from relatives and acquaintances; for example, personal loans taken within three months are not adequate according to MNB expectations, while a loan waiting for a baby can be considered 75% as self-sufficiency converted into a grant in its entirety,
- Involve the debtor’s partner in the proportion of installments corresponding to income: Since banks jointly examine the debtors’ income, this is a viable option in principle, but in practice it only works in the case of loans by the debtors. spouses and requires a close relationship of trust,
- The inclusion of additional collateral in the loan collateral relationship: additional collateral or multiple collateral can also be a realistic option, in this case, we offer not one, but several properties as collateral to contract a mortgage loan. For example, if a young person wants to buy a $ 30 million apartment, he has an adequate income of, say, only 4 percent, 1.2 million florins, compared to at least 6 million florins required by the rules of debt brake, it may be possible to include parental property as additional coverage. If this property is also 30 million, the person could take out a mortgage loan of up to 48 million HUF at the same time with the guarantee of the two floors.
This other collateral can even be an existing property that will only be sold later. Occasionally, there are loans available on the market that specifically make it easy to trade a home, so you can take out a home loan even without initial deductibles or financial savings. At present, to our knowledge, this product is only available from ErstE BANK among the large banks.
We know that such a home exchange financing scheme was also available from the OTP, but a few years ago the product was phased out due to relatively low demand and a complicated process. Their bridging products are also often available to home savings banks, and commercial banks also offer them to customers in financial distress, but these products are not specifically related to home exchanges and are of a different nature and less suitable for customers. housing exchanges.
As for Erste’s currently available solution, the loan enables the borrower to purchase another property prior to the sale of his own property, prior to proceeds from the subsequent sale of the property. In the case of buying a new or used apartment or holiday home, it can be used within a period of 12-24 months between 2 and 100 million guilders, with the joint coverage of the apartment to be sold and the apartment to be purchased. The loan amount cannot exceed 80% of the market value of the residential properties offered as collateral as determined by the appraiser or 100% of the value of the loan guarantee, and cannot exceed 100% of the purchase price ( in the case of a real estate guarantee, if it is equal to 80% of the purchase price). The amount of credit that can be granted is also affected by the customer’s rating established during the credit evaluation. During the 12-24 month period, only interest and administration fee are to be paid, repayment of principal is due in a lump sum at the time of sale of the property for sale, but no later than the end of the finished.
Cover image: Getty Images
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