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Low own contribution insurance, i.e. a fee for the bank’s generosity


100 percent mortgage property values? Very good thing, but unfortunately in the case of low own contribution on a certain amount of credit insurance premiums should be paid. Santol financial comparison experts explain the basic information that every borrower should have.

The vast majority of banks grant mortgage loans for the entire value of real estate. There are even banks that are able to grant loans of up to 110-120 percent. the loan value of the property. We are talking primarily about loans in USD, because in the case of foreign currency liabilities banks are a bit more cautious. Unfortunately, you have to pay for the opportunity to get a loan for the whole value of the house / flat you are buying. the cost is low own contribution insurance. This is reminded by analysts of the financial comparison website Santol.

The matter is quite simple

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harged Insurance is charged on a surplus of over 80%. property values. So if the customer takes a loan that will cover e.g. 85% the value of the property (in other words – 15% of the value of the flat will cover itself, as part of the so-called own contribution), from 5% credit, i.e. a surplus over the ceiling of 80 percent, must be paid low own contribution insurance. At the same time – the word “insurance” can be a bit misleading here – it protects not the interests of the client, but the bank.
Such low own contribution insurance should be paid in advance every 3-5 years. After this time has elapsed, the bank calculates again what percentage of the property value is currently the debt balance. If it again exceeds 80%, the insurance will be taken again.

Can insurance of low own contribution be a serious financial burden for the borrower?

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In the case of loans in USD and depending on the bank, it amounts to even over 3.5 percent. on the loan amount exceeding 80% property values. In the example given above – if the loan amounts to 85 percent. property value (i.e. you need to insure only 5% of the loan), one-off payment should be around USD 600. But even if the loan was 100 percent. property value (the same insurance covers 20% of the loan amount), it is necessary to pay 2.4-2.5 thousand. zł. And a reminder – the premium is usually paid for 3-5 years in advance. If after this period the borrower still owes the bank more than 80 percent. property value, the insurance premium is recalculated for the next period of protection.

And most importantly 

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Does everyone have to pay for the low own contribution insurance? Well no. There are banks providing loans in USD that do not require such collateral. However, it will not be possible to avoid insuring the low own contribution by taking out a foreign currency loan (actually equivalent in current conditions in Poland to a loan in euro). Solution “loans up to 80 percent. the value of the loaned property or insurance ”contains Recommendation T prepared by the Polish Financial Supervision Authority. In theory, this is only a recommendation, but in practice banks should apply it.

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