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Several Banks Now Offering Mortgage Loans with Just 10% Down Payment

In a major development for potential homebuyers, several Hungarian banks have adjusted their lending practices to offer mortgage loans with as little as 10% down payment.
This move, now available at five major financial institutions including OTP, Erste, K&H, CIB, and UniCredit, marks a significant shift from the traditional 20% minimum down payment requirement, making home ownership more accessible for many, especially young buyers meeting specific legal requirements, reports Bankmonitor.

This opportunity significantly aids purchasers who find the standard 20% down payment a major hurdle. For instance, buying a property worth 80 million forints traditionally requires a 16 million forint down payment. However, with the 10% option, this amount is halved to 8 million forints. To put it another way, for a property valued at 80 million forints, banks would lend up to 64 million forints at the 20% down payment threshold, compared to 72 million forints with a 10% down payment.

Initially available at OTP, Erste, and K&H Bank, this option was later joined by CIB and UniCredit. This expansion is particularly beneficial for loan applicants, as the lending practices and evaluations can vary significantly across different banks. Some applicants might find it easier to secure a loan with one bank over another due to how various income sources, like foreign, cash, or entrepreneurial incomes, are treated or differences in the minimum income requirements and contractual conditions.

Bankmonitor experts advise those interested in this financing option to thoroughly research as conditions differ among banks. While some banks offer the 10% down payment option across all residential mortgage products, others may limit it to specific loan types such as CSOK Plusz or market-rate mortgages taken alongside CSOK Plusz loans. Additionally, while some cap the market value of properties eligible under this scheme at 80 million forints, others impose no such limit.

However, it's important to note that the 90% loan-to-value ratio doesn't always mean that banks will lend up to 90% of a property's market value. This is because the loan amount can't exceed the bank-determined loan-to-value (LTV) ratio, which is often lower than the market value. For example, if a property's market value is 80 million forints and the bank calculates the LTV at 15% less, the maximum loan amount would be 68 million forints. In this scenario, a minimum of 12 million forints of down payment is required, which is 15% of the purchasing price, still more favorable than the 20% minimum, which would demand 16 million forints of personal funds for the purchase.

Eligibility for the 10% down payment mortgage loan includes conditions such as neither the borrower nor co-borrower being over 40 years of age at the time of the loan application, and neither having previously owned a 50% or more share in residential property. Exceptions are made for property ownership acquired through inheritance or other legal means where use rights are established by law.

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