The amount you can borrow in Poland can vary depending on the bank and your financial situation. This means that different banks may have different processes and may offer different borrowing limits. Banks have the freedom to determine affordability in their own way but they are also required to apply strict affordability criteria set by Komisja Nadzoru Finansowego (the regulator of the financial services industry in Poland).
Example 1
Borrower: single, 30 years old, no children, no debt
Monthly net income: 15,000 PLN
Mortgage amount possible to borrow: 915,000 PLN
Example 2
Borrower: single, 50 years old, no children, no debt
Monthly net income: 15,000 PLN
Mortgage amount possible to borrow: 825,000 PLN
Example 3
Borrowers: couple, 30 years old, two children, car loan (1,500 PLN monthly payment)
Monthly net income (combined): 15,000 PLN
Mortgage amount possible to borrow: 770,000 PLN
Factors affecting affordability for a mortgage in Poland
Banks in Poland apply strict affordability criteria, ensuring that you can comfortably afford your repayments now, and in the foreseeable future. Let’s look at the basic factors that will affect your affordability for a mortgage in Poland.
Debt
One of the main affordability factors is Debt Service to Income (DStI) ratio. DStI ratio compares your annual cost of debts to your annual income. Your annual cost of debts includes the future potential cost of a mortgage you apply for. In practice we compare a monthly cost of debts to a monthly net income. The maximum DStI ratio is 50% (if your income is higher than an average income in the region) or 40% (if your income is lower than an average income in the region). Theoretically it is possible to get a mortgage with DStI ratio higher than 50% but it is very difficult. For example, your monthly net income is 10,000 PLN. In this case your monthly debts repayment can’t be higher than 5,000 PLN.
Another important affordability rule is the “stress test” rule. This rule requires banks to assess whether you would still be able to make mortgage payments if interest rates were to rise. Banks must use a higher interest rate than the one you have applied for in their stress test calculations. This helps to ensure that you are not approved for a mortgage that you would struggle to repay if interest rates were to go up.
Dependents
Having children or other dependents can affect your borrowing power for a mortgage in Poland. This is because banks in Poland consider your entire financial situation, including your income, debts, and expenses, when determining how much you can borrow. Children or dependents increase your living expenses. Banks in Poland want to ensure that borrowers are approved for mortgages that would leave them with enough money to cover their living expenses or other debts.
Age
Age is one of a factor that can affect your borrowing power and affordability for a mortgage in Poland. For younger borrowers, it can be difficult for banks to assess their creditworthiness and determine their ability to repay the mortgage. One of the issue may be also a lack of credit history and short employment history.
For older borrowers, the main issue is usually their age at the end of the mortgage term. Most banks in Poland have a maximum term up to age 70. There are also banks with a maximum term up to age 75 (or even 80). For older borrowers banks may calculate their income in different way than for younger borrowers, taking into account lower income in the future because of a pension. That’s way a younger borrower can have a higher borrowing power than an older borrower with the same financial situation.
Employment Status
Your employment status can play a significant role in determining your affordability for a mortgage in Poland. Banks in Poland use your employment status as an indicator of your ability to repay the loan.
Full-time permanent employment contract is the best type of employment status for banks in Poland. Banks view this type of employment status as stable and consistent. If you have a casual contract (umowa zlecenie / umowa o dzieło), it may be more difficult for you to get approved for a mortgage. Banks also may have stricter requirements for self-employment, such as requiring a longer trading history and averaging 1-2 years income.
Credit History
Your credit history is one of the most important factors that banks consider when determining your affordability for a mortgage in Poland. Based on information from your credit report banks determine the likelihood that you will repay a loan on time. You can check your credit history here: https://www.bik.pl/
Most banks in Poland don’t require a credit report from your native country.
Don’t worry if you don’t have a credit history in Poland. That’s not a problem. It’s much better not to have a credit history than to have a bad credit history.