January 27, 2022

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7 common mistakes Slovaks make when applying for a mortgage

7 common mistakes Slovaks make when applying for a mortgage

Since the mortgage is a relatively complex financial product, it requires an individual approach. “It includes many features that the bank must examine in detail, such as the applicant’s creditworthiness and credit history, household income and expenses, and determine the purpose such as purchase, rebuild, build, refinance, merge, or a combination thereof,” According to FinGO.sk’s loan manager Eva Sablova.

This is followed by the collection of documents for a specific purpose, the assessment of property, its value, quality and legal status. In this vast amount of information, you will often find something that complicates the approval of a mortgage. Therefore, it is better to avoid mistakes and obstacles that mortgage applicants face most often.

Entrepreneurs are having a tougher time

According to Financial Analyst Marián Búlik of OVB Allfinanz Slovensko, the ideal applicant for whom banks will provide the most advantageous mortgage is someone who has an interesting income, long-term employment, unlimited employment or a fixed-term employment relationship at least once.

Most banks evaluate the past six to twelve months, which they take into account when determining an employee’s average income. It is important to realize that many banks in Slovakia accept, for example, documented income from rental property as client income.

“It is very difficult to get a good loan if you are an entrepreneur. In this case, it is important to check the situation in many banks, as they have different approaches to the creditworthiness of entrepreneurs. For example, a bank may admit ten percent of the Revenue as income, while another bank can accept up to 60 percent,” explains M. Belek.

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E. Šablová adds that although entrepreneurs rely on the last completed tax period, provisionally until March also on business results from the previous closed financial year, the client must also prove current business results, according to which he declares his good financial position in the business.

The most common obstacles for Slovaks when applying for a mortgage according to mortgage specialist Miroslav Tomas:
  • Non-payment of small loans (for the phone, for household appliances)
  • Debt in the old bank – many customers had or had several accounts in the past, but over time they stopped using them, and because of not using them, the account went into unauthorized overdrafts, a negative entry in the credit history
  • Payments in non-bank financial institutions that customers pay – eliminate their credit limit
  • pandemic postponement
  • to implement
  • Short Recruitment – Fixed Term Recruitment
  • Conflicts in the real and legal status of the property
  • Restrictive Notes on Title Deed

“Entrepreneurs must also pay attention to active business. This means that commercial banks, when assessing their income, emphasize credit movements in their business accounts, which indicate their economic activity. Also, if their resulting economic activity has a negative value on the tax return, or a loss Accounting at the end of the year, or negative capital, then financing in this case would be problematic,” M. Tomash.

At the same time, he adds, it is important for entrepreneurs to note the fact that although their monthly income may be higher, from the point of view of the banks, it is corporate money.