Traditional mortgage loans in Poland no longer surprise anyone. Every year, thousands of ordinary Poles who want to acquire their own four corners, as well as numerous investors operating on the real estate market decide on them. The buy to let loan is a much less known type of loan. What is it and can it be taken in Poland at all? Is it worth considering?
Buy to let – how does it work?
This is not unusual in itself and is often done in Poland as well. Usually, it is decided by wealthy people or those with large savings. Fees collected from tenants allow them not only to cover the rent but also earn relatively a lot (the location or standard of a given apartment is of great importance here).
However, not everyone has the financial resources to buy a property and be satisfied with a relatively slow return on investment. Therefore, in some countries, especially in Great Britain, the so-called buy to let loan has become popular. Buy to let – how does it work in this case?
As in the case of a mortgage, the bank grants us a loan to buy real estate and secures it with a mortgage. However, there are also significant differences compared to a traditional home loan. The lender is aware that the purpose of purchasing the property is to rent it and therefore has certain additional requirements, but also offers borrowers certain privileges.
Buy to let loan – conditions
As with an ordinary mortgage, not everyone will be able to get a buy to let loans. If we apply for it in the UK, we will have to meet the following conditions:
have a sufficiently high capacity credit (the so-called credit score)
have a positive credit history,
be permanently registered in the UK and be on the electoral roll.
Borrowers do not have to be British citizens, so there is nothing to prevent a Pole from taking a buy to let loans in the UK. However, it must be a person who lives there permanently, earns well, and has not had problems with timely payments in the past.
It is worth knowing that when calculating the creditworthiness necessary to take out a loan, the bank takes into account not only current income (from work or other investments) but also the potential profits from the lease of the property purchased with a loan. In practice, this means that a buy to let loans may be easier to obtain than a mortgage for the house or apartment in which we will live.
What is buy to let credit – profit graphics
It is hard to indicate how much you can earn on investments of this type. A lot depends on what loan conditions we manage to negotiate with the bank (remember that the interest rate on the buy to let loan may be higher than that of a traditional mortgage), what we will set the rental fee and how well we will manage the entire investment. A good investor is able not only to cover the loan installment and all costs from the lease but also to earn a lot more.
Although the real estate market is not experiencing such huge increases as it was until relatively recently, it is still possible to earn potentially large sums of money with it. There is no shortage of people willing to rent houses and flats, even at exorbitant prices – especially if we choose the location and standard of the property well.
It is worth pointing out that investment in real estate, whether with a loan or your savings, is relatively low-risk. After all, it is unlikely that the demand for housing will drop significantly, quite the contrary. It will probably only grow.
What should I do before taking out a buy to let loan?
As mentioned above, a buy to let loan can be very profitable for the investor – but only take into account that he will prepare well for such an investment. The key is to choose the right location of the house or apartment that we want to buy.
Our instincts may tell us to decide on a property in a city or neighborhood we know, but it will not always be the best solution. The standard of the apartment and the type of tenants we plan to allocate to is also very important. An apartment for a large group of students must look different than for a family with children. We should seriously consider all these aspects and take into account when choosing the property to buy with a buy to let loan.
However, proper real estate is not everything. We will save a lot if we choose not the first loan that catches our eye, but one that will offer the most profitable conditions. Therefore, we should compare the offers of different banks, it may also be a good idea to seek advice from a credit intermediary.
Is buy to let credit available in Poland?
The Polish investment market, including real estate, is constantly developing. Banks are also evolving, introducing new products to their offers, and trying to streamline and modernize the loan granting process. Unfortunately, despite this, buy to let loans have not yet appeared in Polish financial institutions.
So if we want to try our hand at this type of investment, we must direct our attention to the West, otherwise, we will only have to wait patiently. However, it should be pointed out that there are no signs that anything will change in this respect any time soon. As in the case of a reverse mortgage, which, among others, in Great Britain is very popular, and in Poland, most people have not even heard of it.
Buy to let loan – summary
For years, we have found a real estate on the lists of the best investment targets. This market undoubtedly has enormous potential, but we often cannot afford to take advantage of it. Own savings in many cases are not enough to finance the property to be able to rent it. For this reason, a buy to let loan is such an interesting banking product.
With its help, you can gain a lot every month, and after several dozen years, settle the loan without paying a single installment of your money. For now, however, Poles who are interested in this type of loan must be content with its operation abroad, as it has not yet gained popularity in our country.