Check when a loan from a developer can pay off and why banks are interested in permanent cooperation with selected developers.
Developer loan, what is it about?
A development loan is one way of financing housing projects. It is granted to companies (development companies) to cover expensive investment projects.
Most development companies use an external source of capital because they are often unable to cover the costs of the project themselves. Even those who can afford to pay their own expenses often decide to take out a loan, because it is definitely a cheaper solution and gives the effect of the so-called leverage (allows you to make more profit).
A development loan is a tool that allows investors to carry out more construction projects and is often confused with a loan taken from a developer, i.e. a loan offer that investors prepare in cooperation with banks for future clients.
A developer loan is not a specific financing offer. A developer who often works not with one, but with several banks, mediates in the process of arranging credit for his client.
Thanks to the fact that he is able to give up his commission for brokering, the customer can receive a more attractive offer than the one that would be waiting for him at the bank’s outlet. In addition, the customer can count on a lower margin many times, and the commission on the loan granted is practically zero in most cases.
The client, when using the investor’s offer, does not have to worry about formalities, which are mostly handled by an adviser cooperating with a given developer. He may prefer to use the advice of a financial expert who will collect for him and analyze several mortgage loan offers, negotiate better conditions, prepare the necessary documentation and supervise the entire financing process. The customer must appear in a bank outlet only once to sign a loan agreement.
For the purposes of this article, a housing loan from a developer will be called a developer loan.
Developer loan terms
Developers and banks emphasize that the procedures related to granting a loan through a developer are taking less time. It is true that the bank calculates the creditworthiness in the same way and sets the maximum loan value in relation to the value of the property, but the procedure for verifying the legal status of the property, which is to be a collateral for the loan, is shorter.
Sometimes there are situations in which a given developer does not mediate in the process of granting a loan, but cooperates with a particular bank. In such situations, customers can count on a special credit offer, thanks to which they can receive e.g. free insurance for some time.
Developer loan terms
If you want to get a loan from a developer, you must meet the same conditions as for a standard mortgage. This means that first of all you should have creditworthiness and the required own contribution, as well as conclude a development contract. Only after fulfilling these requirements can a developer financial advisor submit applications to selected banks and conduct further negotiations.
Before you decide on this option, be sure to check what the developer is not allowed and check what you should pay attention to when signing the contract.
Do you know that…
With the help of the developer, you will only need to provide documents confirming your identity and your revenues. The developer will organize documents regarding the purchased property for you.
Developer loan interest rate
The interest rate on a particular loan offer depends on many factors. First of all, from the bank’s individual offer, adviser’s negotiating capacity, and the conditions on which the investor has agreed with a particular bank.
On the website of a given developer, you can often find a tool such as a loan installment calculator, however, the simulation presented in it is for information purposes only and the installment result is exemplary, so you should not be too suggestive of it.
Developer loan and development contract
The purchase of almost half of the apartments in Poland is financed with a mortgage. This means that every second person has to face the formalities regarding the loan and go through this complicated process entirely.
The first difficulty appears even before submitting the loan application, which is the developer agreement. For most people, it causes fear, because how can I sign a contract if I don’t know if I will get a loan at all? On the internet, you’ll find step-by-step information on how to take a mortgage so you can prepare for this process.
Development contract and credit
The development agreement is concluded in the form of a notarial deed and is not a reservation agreement, with which it is most often confused (the reservation agreement is not regulated by law).
Pursuant to the Act of 16 September 2011 on the protection of the rights of buyers of a flat or a single-family house, art. 3, paragraph 5, a development agreement is an agreement under which the developer undertakes to establish or transfer to the buyer after the end of a development project the right: separate ownership of a dwelling, or perpetual usufruct of land, or ownership of a single-family house set up on perpetual usufruct of land established as a separate property, and the buyer undertakes to meet the cash benefit to the developer against the purchase price of this right .
A development agreement is therefore necessary to be able to apply for a mortgage at all, because only on the basis of this document the bank knows that the rights to the property will be transferred to us.
The problem arises when, after signing the development contract, the bank will not want to grant us a loan for reasons that we did not take into account before. This could be, for example, the fact that we are employed in an industry with a high risk of dismissal or a temporary employment agency.
You should protect yourself against such accidents in advance by adding clauses to the development contract, thanks to which we will be able to withdraw from the contract without costs in the event of a refused credit decision from the bank. Contrary to what it may seem, developers do not add such clauses themselves, which is why you should ask for it yourself.
By using a developer loan, we can avoid situations in which our loan application is rejected for formal reasons (no specific document) or because of the credibility of the developer.
What’s more, financial advisors cooperating with a given investor check cost-free creditworthiness of the client, thanks to which the chance of getting a loan is much greater.
Developer bankruptcy and mortgage
Buying an apartment is often a lifelong choice. Unfortunately, sometimes it happens that even a thriving developer will get into financial trouble and will file for bankruptcy. Fortunately, in such a situation, the rights of the buyer of the apartment are defended by the Development Act, which aims to maximally secure the funds paid by the buyer.
Developer loan – is it worth it?
The developer, who is very interested in selling apartments, is ready to give the customer using the credit offer presented to him additional bonuses. For example, you can only pay 50% of notary fees when buying real estate or get free insurance.
What’s more, the client without access to additional costs, gains access to independent financial consultations and individual care. It does not have to prepare loan documentation and applications, negotiate more favorable conditions and supervise the entire credit process.
Of course, it may happen that a bank that does not cooperate with the developer will prepare a more favorable loan offer for us, but this situation is extremely rare.