What are the costs of a mortgage?

Basic mortgage costs

This is the interest rate, which consists of WIBOR plus a margin. You are already familiar with these costs from previous materials, but as a reminder — these are the costs you pay until the end of your mortgage. The margin remains fixed for the entire term of the agreement, while WIBOR can change every few months. An agreement with, for example, 3M WIBOR updates the interest rate every three months.

Loan origination fee is a one-time charge. Its amount is expressed as a percentage, e.g., 2% of the loan amount. This means that if you borrow half a million zlotys, you will have to pay a ten-thousand-zloty fee.

From previous materials, you already know that in addition to your down payment, you need to prepare cash for quite a few expenses, such as notary fees or property transfer taxes. These can add up to tens of thousands of zlotys, and adding a large origination fee on top of that can be quite a challenge. Fortunately, there are plenty of offers with no origination fee, and even if you choose an offer that includes one, a good broker can often negotiate it.

Property appraisal fee

Before the bank lends you money, it must know how much the property that will serve as collateral is worth. Although it may be worth much more to you, what matters is the real market value at which it could be sold in the event of repayment problems.

A property appraiser prepares a valuation report and submits this information to the bank. The cost of preparing the document depends on the type of property. A finished apartment on the secondary market is assessed differently than each stage of building a house. A single appraisal can cost between 200 and 700 PLN; if the loan is paid out in tranches, the appraiser's visit might be cheaper, but you will pay for each one separately.

Why doesn't the bank just accept the transaction price instead of charging you for an appraisal? After all, you paid a specific amount, which could be considered a real reflection of the market. Unfortunately, the bank needs an independent confirmation of value — you might have "fallen in love" with the first apartment you saw and overpaid, which a potential buyer wouldn't do if the property had to be sold due to a mortgage.

Bridge insurance

Your property serves as collateral for the bank. However, a significant amount of time can pass between the disbursement of the mortgage and the court entering the mortgage into the land and mortgage register. The bank insures itself against the risk of not having collateral, but you are the one who bears the cost.

The amount of the fee depends on how quickly you obtain the entry in the land and mortgage register. In smaller towns, this can be handled quite quickly, while in large cities, it can take several months. For every such month, you will pay several hundred zlotys in the form of an increased margin.

Property insurance

The bank requires you to insure your property with basic coverage that allows you to recover funds in the event of a disaster. Perhaps after a fire or gas explosion, the building's structure is no longer safe to live in — without insurance, you would be left without a place to live while still having a mortgage. Therefore, since you are getting insurance anyway, choose broader coverage than just the walls. Flooding a neighbor happens, and standard insurance packages bundled with mortgages have plenty of loopholes that exclude liability for things like apartment furnishings.

In most cases, an assignment of rights to the bank applies, which means that in the event of a potential insurance payout, the bank decides how it is used. They may decide that even a minor claim will not be covered because it is safer to use that amount to pay down part of the loan.

The cost of such insurance depends on the property, but it usually ranges between 250 PLN and 700 PLN per year.

Low down payment insurance

You will pay for this if your down payment is less than 20%. This is usually done by increasing the margin until you have made up the difference. This is very uneconomical and can last for several years because, at the beginning, your installment consists mainly of interest rather than principal.

• Life insurance

Its scope is self-explanatory. Life insurance is not always mandatory, but the bank will likely pressure you to get it. They may also offer a group policy as part of a loan package if you are applying with others, such as your spouse. Remember to carefully review the terms of the agreement, as they may contain an extensive list of liability exclusions, which is why it is better to choose an individual policy. The cost is approximately 0.2% of the insured sum per year.

• Job loss insurance

Although in theory it allows the insurer to cover your mortgage installments for a few months, in reality, it is simply a poor financial product. The list of conditions and limitations is long, and even the definition of job loss itself can be so specific that obtaining a payout is extremely complicated and highly dependent on the circumstances.

If the bank requires job loss insurance and their offer is the cheapest anyway, view it as an additional commission rather than something that will save you in a pinch.

Costs of additional products

The bank may offer you promotional loan terms if you take out additional products, such as a credit card or a bank account. This is standard cross-selling. A reduced margin for having your salary deposited into an account? That is not a difficult condition to meet, and it is free. But what if the bank changes the terms in the future and you end up having to pay fees? These are individual matters that you simply need to calculate and compare to see what is more cost-effective.

Do not focus on the amounts mentioned here. They are almost always calculated on an individual basis. I just want you to be aware that they exist. Also, do not worry too much about the names. When choosing a mortgage, what matters are the total costs, regardless of what the bank calls the components—interest, commissions, fees, premiums, insurance, etc. It makes no difference to you. Money that leaves your account is just money—it will always be worth the same, regardless of the payment reference.