Let’s look at the operation of borrowing rules in 2018. Once the lending market has started, banks are once again crushing into transactions. As a result, having “not so much appreciated” and looking at the customer, they look silly with their heart, jerk their nerves, hinder the process. This is sometimes due to the misunderstanding of the “cashier trained by a cashier in two days”, while in others the overload may be a problem. It is certain that customers need to be much more aware and prepared for the loan application, which can significantly speed up the business!
Several of you wrote me email to get other information from agents and credit intermediaries than to reality. You have to pay close attention to this, because in this case you start the case in the belief that you will get the money. When you go, you pay the deposit, the bank charges, and at one point in the business (after they have missed any time), they say that it won’t work…
Income-based Repayment Detail (hereinafter referred to as YMM)
32/2014. (IX. 10.) ABC Decree regulating income-based repayment installments and loan-to-loan ratios- update: from 2018.1 ABC regulation tightens for 10-year interest rate loans
No credit intermediation or disbursement organization can deviate from this. It should be clear to you that the ABC regulation will affect your credit transaction TE exactly. Fortunately, you can easily calculate the limits of your credit transaction.
In any case, the basis of the ABC will be the certified net income . In the course of the investigation, the income of the taxpayers and the repayment of their existing loans are taken together. The certificate of income cannot be older than 30 days.
The certificate can be:
- issued by state tax authorities
- issued by the body providing the benefit of a Hungarian or foreign state,
- customer’s statement and the payment of the customer’s payment account on the basis of the payment order, the amount of the pension paid by the Hungarian or foreign state, after which the required public charges have been deducted to the knowledge of the client
- a regular annuity certified by a court or an organization providing a business rendering service on the basis of a decision by the court on the finding or approval.
In addition to the repayment installment of the required financing, the monthly repayment installment of all disbursed loans / leases of the debtor and the lender and of the lender and his / her close relatives with the lessee, and 5% of the credit card contract or credit line related to the payment account. For example, you have a credit limit of 200,000 forints, of which you used 20,000 forints. In this case, the 200,000 HUF x 0.05 (5%) = 10,000 Forints will be added to the ABC as an existing monthly installment.
Update: The following ABC ratio is valid for mortgages fixed for 10 or more!
Using the ABC, the income test is as follows: if the certified net income of the borrowers is less than 400,000 HUF, the total repayment installment of the existing loan and the new loan may not exceed 50% of the certified income, and in case of income exceeding 400,000 HUF at 60%. Income and debt burdens need to be managed in aggregate for several taxpayers.
Suppose your mate and your total net income are $ 330,000 / month. You want a loan of 18 million forints.
You currently have a personal loan, with a monthly repayment of $ 22,000. In addition, you have an overdraft facility ($ 200,000) that you do not use. Regardless, we need to deduct 10,000 forints from the ABC, so:
330,000 x 0.5 = 165,000 Forints Income Considerable, from which we need to withdraw – (22,000 + 10,000) existing loan repayments = You can take a maximum loan repayment of 133,000 forints.
You want to borrow for 10 years, the repayment of which would be around 180,000 HUF – You cannot get the loan because the repayment is higher than the ABC number
Take the same credit for 20 years, the repayment of which would be around HUF 100,000- You can get the loan because the repayment is lower than the ABC index
An intermediate solution may be to combine mortgage loans with housing savings, since the ABC indicator does not take into account the fees paid for housing savings, but you can pre-repay the housing savings before the end of the loan term.
Important: The ABC indicator is understood to include all future loans. This means that even if you want to pick up a plain merchandise in the future, you will also calculate your ABC profitability. If you are “fully loaded” you will not be able to take any further credit for anything!
Within 10 years, fixed-rate loans decrease the ABC
In view of the nominal and real wage increases seen in recent years, the Decree allows for higher repayment installments from 1 July 2019 in the case of a monthly income of 500 thousand forints instead of the current 400 thousand.
Why shouldn’t we consider the ABC as a guide?
The ABC indicator is basically a good initiative, but is it important to consider before borrowing that we have the right limits for this ABC? In Hungary, there is a (also) living condition of “black income”, so you can be sure that there will be borrowers who will cut out the ABC, while paying a fraction of their real income on credit.
If you have only certified and after-tax income, it is important to consider and set rules that are much stricter than the ABC requirement. It is said that it is not healthy to spend half of our income on housing! The reason for this is that there are no overheads, custody and other overhead costs in this release.
Always follow this rule!
The easiest to remember rule is your income
- Spend 30% on credit maximum
- Spend 30% on saving at minimum
- Cover 40% of your cost of living
In this case, you can guarantee your material well-being both now and in the future. This is the only way to ensure that a potential rise in interest or a change in life situation will not force you to drastically compromise your quality of life!
Useful articles to read:
How do we train a financial reserve?
How do you use the financial envelope system?
Credit Coverage Concept (HFM)
Many are afraid that their property will not “withstand” the amount of credit required. Basically, the HFM indicator was created because the banks overpayed the real estate in the pre-crisis credit crunch. That’s why they have built a kind of brake on the system that prevents anyone from getting home without the need for proper power!
With regard to loan-to-deposit ratios – in the case of forint-based financing – the financing rate is 80% for mortgage loans. Some tightening in the case of foreign currency-based loans: 50% for euro-based loans and 35% for real estate collateral in other currencies. In the case of financial leasing, a 5% higher loan coverage ratio can be used.
Banks are only stricter when borrowing
In practice, in the case of a forint-based loan, the “market value 80%” theory is not always met. This means that, in the case of a property worth HUF 25,000,000 (you think), you have been credited with a $ 20,000,000 loan if you meet all the other conditions.
Banks change rates by different methods…
- Always the bank’s own valuation tells the decisive market value! In practice, a bank valuer always calculates a “bottom” value that ensures the bank. If you think the house is worth 25,000,000 HUF and the appraiser underestimates the property by 10%, you can get a loan of 18,000,000 forints instead of 20,000,000 forints, ie two million forints less .
- Credit collateral value (hereinafter referred to as HBÉ) is calculated. This means that the bank takes 70-90% of the established market value into account depending on the location of the flat in the area. So for a 25,000,000 forints you have, but according to the bank valued at 23,000,000 forints, the HBÉ value can be 16,100,000 forints, 80% of which is 12,880,000 for which you can get a loan…
How to determine the value of the collateral?
In addition to the three methods so far, the value of the collateral has now been increased by a quarter:
- Evaluation based on analysis of market comparative data
- Yield calculation
- Cost-based evaluation
- Statistical based evaluation
It will not go without money
As the last major rule I would bring the physiological condition of borrowing. Although interest rates are good or the CSOK is a great opportunity (more), you should not be tempted to borrow immediately. It is necessary to think about what financial resources we have and to go into the process only if we have enough self-sufficient resources (self-sufficiency for housing, money for ancillary costs, lawyers, fees, etc.).
Customers who do not have their own power are not too late. It is advisable for them to start with self-collection first, so that they can start borrowing with a well-founded background.