Buying a house at the construction stage can raise many questions. How is such a property financed? Do banks provide loans for a “hole in the ground”? The answer is: yes! A mortgage for an apartment under construction is a popular and safe solution that allows you to buy your dream home even during the development of the housing estate. How does it work in practice? Here’s everything you need to know.
In this article, you will learn:
1. How does a mortgage for an apartment under construction work?
2. How to check a developer?
3. What is an escrow account?
4. What conditions need to be met to get a mortgage?
5. Is it worth buying a “hole in the ground”?
6. Is purchasing a property at the construction stage safe?
How does a mortgage for an apartment under construction work?
Banks provide loans for properties under construction, but they disburse the funds gradually. The full amount is not transferred to the developer’s account immediately; instead, it is divided into installments. Each installment depends on the stage of construction and the schedule agreed upon in the contract.
This allows the bank to secure itself in case the construction is not completed. However, such situations are extremely rare, especially with reputable developers. Until the house is completed, the borrower only repays the interest. The repayment of the principal starts only after the construction is finished.
Construction of Miasto Ogród 6
How to check the developer?
Although the risk of construction being interrupted is low, it is worth thoroughly checking the developer’s experience before making a purchase. Here are some steps that will help you make an informed decision:
– Check previous investments – see what the developer has already built and delivered.
– Talk to residents – if possible, visit older developments by this developer and ask the tenants about their experiences.
– Read online reviews – however, keep in mind that people are more likely to share negative experiences than positive ones, so it’s important to approach them with some caution.
– Join resident groups – on Facebook and online forums, you can find groups where you can ask about the realities of living in a particular development.
What is an escrow account?
Developers maintain escrow accounts that further protect clients’ funds. This means that the money paid by borrowers does not go directly to the developer but is controlled by the bank. The funds are transferred as the construction progresses, providing additional protection in case of financial issues with the investor.
What conditions must be met to get a mortgage loan?
To obtain a mortgage loan for a property under construction, you must meet the bank’s standard requirements:
– Own contribution (usually 20% of the property’s value, unless there are special government programs supporting, for example, families or young people – in that case, the own contribution may be lower or not required),
– Creditworthiness, meaning adequate income and no excessive debt,
– A positive credit history in BIK (Credit Information Bureau),
– A contract with the developer and a construction schedule.
Is it worth buying a “hole in the ground”?
By deciding to purchase in a development still under construction, you gain several key benefits:
– Lower price – homes at the early stages of construction are cheaper. It’s like booking a flight ticket in a first-minute offer – the earlier you buy, the less you pay.
– Greater selection – you have the opportunity to choose the best location for your unit, the direction it faces, or the layout. At the later stages of construction, only a few units are available.
– Time to prepare finances – before the construction is completed, you have time to gather funds for interior finishing.
Development plan – Osiedle Młodych
Is purchasing a property under construction safe?
Yes, it is a proven and safe solution. Banks carefully analyze investments and developers before granting a loan. Additionally, escrow accounts secure client payments. However, it is crucial to choose reliable developers with a good track record of completing housing projects.
Summary
If you were concerned about buying a house in a development, we hope we’ve cleared up your doubts. Many people choose this form of purchase and financing, and the result is their dream home – new, fresh, and built just for them.
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