> A guide to mortgage repayment holidays by Grupa ANG

A guide to mortgage repayment holidays by Grupa ANG

On July 29 this year a new act on mortgage repayment holidays will enter into force and it will allow borrowers to suspend mortgage repayments. It is designed as a lifeline for borrowers in light of rising installments caused by rising interest rates. What is a mortgage repayment holiday? Is it a good option for you? Who qualifies for it? What conditions must be met to apply for a mortgage repayment holiday? These are only a few of the questions that many borrowers ask themselves. That’s why we’ve created this guide that will help you make a decision whether you can and want to take advantage of a mortgage repayment holiday.

Following answers and information were prepared by Agnieszka Rapcewicz, Compliance Officer in Grupa ANG.

What exactly is “mortgage repayment holiday” and when can you get it?

Mortgage repayment holiday will enter into force on July 29, as part of the Act of July 7, 2022 on crowdfunding for business ventures and assistance for borrowers. It is a real support and help for borrowers who have a mortgage, as it allows them to suspend their mortgage payments for a certain period of time this year and the following year. What does it exactly look like?

Mortgagors will be able to suspend 4 mortgage installments in 2022 (in the third quarter in August and September, and in the fourth quarter in two selected months) and 4 installments in 2023 (one in each quarter).

You need to remember that the suspended installments are moved, i.e. the loan period and the dates provided for in the loan agreement are extended by the period of suspension of loan repayment. It is important, however, that no interest is charged during the holiday. The shifted installment will be payable in the capital part together with the current interest charged. It can be both lower and higher at the moment of final repayment of the postponed installment.

What conditions must be met to get a mortgage repayment holiday?

Mortgage repayment holidays are available for borrowers who:

– have one mortgage loan in PLN

– the loan was taken out to meet one’s own housing needs;

– the loan agreement was signed before July 1, 2022, and the end of the loan period specified in the agreement is at least 6 months after July 1, 2022.

This means that, first, borrowers who have mortgage loans in foreign currencies, e.g. in Swiss francs or in euros, are excluded from applying for the mortgage repayment holiday. Second, it’s applicable only if we took out the loan for our own housing needs. Information on how housing needs are understood can be found in the answer to the question: How to understand the phrase “meeting one’s own housing needs”, which is a condition for getting a mortgage repayment holiday?

When it comes to the condition regarding the date of signing the contract and the enddate of the loan period it is best illustrated by the following example:

We have a mortgage loan agreement signed on May 12, 2016, with a loan period ending on October 25, 2022. In this case, you don’t qualify for a mortgage repayment holiday. If, however, the end of the loan period falls after January 1, 2023 for the indicated contract, then you do qualify, provided that the other loan conditions referred to above are met (i.e. the currency and purpose of the loan).

Do mortgage repayment holidays only apply to loans with a variable interest rate?

No. Both customers who have a loan with a variable rate and a fixed interest rate (periodically fixed) can take advantage of the holidays

How to understand the phrase “meeting one’s own housing needs”, which is a condition for getting a mortgage repayment holiday?

It is difficult to give a clear-cut answer to this question, because the act does not define “one’s own housing needs”. Most likely, it will only be clarified when individual banks provide information on submitting applications for mortgage repayment holidays.

Where does the uncertainty come from? Well, a rational legislator, if they wanted “one’s own housing needs” to be understood the same way as “one’s own housing purposes” defined in the Personal Income Tax Act (PIT), then they should use exactly the same wording, i.e. use the word “purposes” instead of “needs”. Alternatively, they should explicitly indicate that “housing needs” should be understood as “housing purposes” in the PIT Act.

As the legislator did neither of the above, it should be assumed that they are not the same concepts. Unfortunately, in the mortgage repayment holiday act we do not have a definition of “one’s own housing needs”, which means that the interpretation of this concept will be made by banks.

It can also be assumed that what counts is the intention at the time of taking out the mortgage. What does it mean? This should be understood as follows – at the time of signing the mortgage contract, the real estate was purchased to satisfy the borrower’s own housing needs. Later, the situation could have changed, i.e. the borrower, for example, moved to another property and, for example, the real estate purchased on credit is currently rented out. However, he had no intention of doing so when taking out the mortgage.

The situation is different if the borrower purchased the property on a loan and its purpose already at that time was to be rented out, and not intended for the borrower to live in.

Do you have to meet certain income criteria to take advantage of mortgage repayment holidays?

No. Mortgage repayment holidays are addressed to all borrowers who meet the requirements described above, i.e. have one mortgage loan in the Polish currency to meet their own housing needs, and the loan agreement was signed before July 1, 2022. The financial situation of the borrowers is irrelevant in this case.

What formalities must be completed to get the mortgage repayment holiday?

First of all, you need to apply to the bank where the loan is taken. The application can be submitted both in writing and online (through online banking). The application must contain: consumer (borrower) data, bank details, date of signing the contract and date of its completion. You should also indicate the period for which you want to suspend the repayment and attach a statement that the application concerns a mortgage loan taken out to meet your own housing needs. What is important – the indicated statement must also contain the following clause: “I am aware of criminal liability for submitting a false declaration.”

Until when are banks obliged to post a mortgage repayment holiday application on their websites?

It is certain that by August 1, 2022 at the latest, banks will publish templates of such applications on their websites or in the electronic banking system. The loan repayment will be suspended on the date of delivery of the above-mentioned application to the lender and for the period indicated in it. The bank will confirm its receipt within 21 days from the date of delivery of your application. It is worth remembering that the suspension of loan repayment is not dependent on obtaining a confirmation from the bank.

Will it be possible to get the mortgage repayment holiday while using the Borrowers Support Fund (Fundusz Wsparcia Kredytobiorców – FWK)?

It can be assumed that both forms of assistance cannot be used simultaneously, i.e. in the same months. However, it is not forbidden to use FWK in some months and mortgage repayment holiday in others. It does not result directly from the regulations, but from the fact that the assistance from the FWK is in the form of subsidies to the loan installments, while the mortgage repayment holidays consist in the suspension of loan repayment. If we suspend loan repayment in certain months, then there is nothing to be subsidized by FWK during this time. Probably, the subsidies from FWK will be paid according to the schedule, however, due to the suspension of loan repayment as part of the holidays, the subsidies from FWK will be credited towards the next installments after the end of the mortgage holidays.

When can you use the help of the Borrowers Support Fund (Fundusz Wsparcia Kredytobiorców – FWK) and what does this help look like?

As a reminder: the help of the Borrowers Support Fund (FWK) is available only for those who have lost their jobs or meet certain income criteria. The help consists in the financial support of the borrowers. Support from the FWK will not be granted if the borrower at the time of submitting the application is (or was  in the period of six months before submitting the application) the owner of another property (an apartment or a house).

People, who currently or in the past six months before submitting their application, have a cooperative right to a flat or a single-family house in a housing cooperative or have a claim to transfer to them the ownership of a flat, single-family house, cooperative right to housing are also excluded from assistance of FWK.

Does owning a different property prevent you from taking advantage of the “mortgage repayment holidays”?

No. The mere fact that you own a different property does not prevent you from taking advantage of the mortgage repayment holidays. It is important, however, that even if we have several loans, we can suspend the repayment of only one of them – the one that was related to satisfying our own housing needs, meaning the one that we took out to buy an apartment (or a house) in which we at least intended to live, and not that was bought for rent.

Will mortgage repayment holidays make it difficult / impossible to receive further loans in the future?

There is no such concern as it does not result in any way from the mortgage repayment holidays act. The information about using the repayment suspension will, however, be reported to the the Credit Information Bureau (Biuro Informacji Kredytowej – BIK) in the same way as any other postponement (suspension) of installment repayments – resulting from loan moratorium offered by banks or covid related loan repayment holidays. 

BIK declares that the information about the suspension of installments as part of the mortgage repayment holidays will not affect the assessment / opinion of a given borrower in BIK. The bank, on the other hand, will take this information into account when assessing creditworthiness according to its own guidelines. Potentially, the bank may perceive a borrower using mortgage repayment holidays as a higher-risk customer, which may reduce his chances of getting a loan or increase the cost of granting it. However, taking the holidays will not automatically prevent you from taking out a loan in the future. Each bank makes a decision to grant a loan based on its own criteria and at the time and in the process of considering a given loan application.

Is it possible to overpay a mortgage while using mortgage repayment holidays?

There is no basis to say that banks would generally prevent overpaying loans during mortgage holidays. It would depend on the provisions in the customer’s credit agreement.

Check out other frequently asked questions

The Polish Financial Supervision Authority encourages borrowers who decide to use this aid solution to use the funds “saved” during the “mortgage holidays” to reduce their debt – overpay mortgage. This will shorten the period for which the loan was taken or lower the amount of future loan installments, which will reduce the burden on household budgets in the future (source: https://isap.sejm.gov.pl/isap.nsf/DocDetails.xsp?id=) WDU20220001488)

In the act (specifically in Art. 73, which refers to the “common” mortgage holidays discussed in this material), the described case is not distinguished. However, if the general conditions of the loan, entitling to benefit from the aid, are met, it should be possible to suspend the repayment of the interest installment. Ultimately, however, banks may provide a different interpretation in this regard, so be sure to pay attention to your bank’s information on applying for mortgage holidays.

It depends on the details, especially who owns the property and for what purposes the loans were taken. Each case should be considered individually and taking into account the banks’ interpretative guidelines, which will probably be issued soon.

The act does not discuss the above-mentioned case. Therefore, we should wait for the guidelines of the banks and the Polish Bank Association in this regard. As a reminder, mortgage repayment holidays apply to mortgage loans within the meaning of Art. 3 of the act on mortgage loans and supervision of mortgage brokers and agents:

“A mortgage contract means an agreement under which the creditor grants the consumer a loan or promises him to grant a loan secured by a mortgage or other right related to residential real estate, or intended to finance the acquisition or maintenance (that is not related to business activity or running a farm) of:

1) ownership of a residential building or  a flat constituting a separate real estate, as well as their construction or reconstruction within the meaning of art. 3 points 6 and 7a of the Act of July 7, 1994 – Construction Law (Journal of Laws of 2019, item 1186, as amended 2);

2) cooperative ownership right to the property;

3) ownership of a land property or its part;

4) a share in the joint ownership of a residential building or a flat constituting a separate real estate or a share in a land property.

  1. A mortgage contract is in particular a contract regarding:

1) a loan ,

2) a loan within the meaning of Art. 69 sec. 1 of the Act of August 29, 1997 – Banking Law (Journal of Laws of 2019, item 2357 and of 2020, items 284, 288 and 321),

3) postponing the payoff date for the consumer,

4) a loan in which the creditor incurs an obligation to a third party and the consumer undertakes to return the service provided to the creditor,

5) a revolving loan – provided that it meets the conditions specified in sec. 1. “

 

Additionally, such a loan must be taken out in order to meet one’s own housing needs. It may be permissible to suspend repayment of loan installments in the case of a mortgage and cash loan consolidation loan, but the bank may delve into the specific objectives of taking out a cash loan. Unfortunately, it is difficult to answer this question unequivocally. As soon as there are any guidelines in this regard, we should publish them immediately.

Yes, such a person can use the mortgage holidays because they live in an apartment covered by the loan. It can be clearly stated that the loan was taken “to satisfy one’s own housing needs”. It does not matter that another house is currently being built without a loan, since the borrower does not live in it.

If a borrower took out only one mortgage loan on a housing plot purchase, where he plans to build a house, one’s dealing with a mortgage loan as defined in the Mortgage Act and the Supervision of Mortgage Brokers and Agents. The problem lies in the interpretation of “meeting one’s housing needs”. If a house is being built, loan repayment probably could be suspended. In the case of the land itself, the bank might not accept it as a loan taken out “to meet one’s housing needs”. We must wait for the bank’s directives, as the act doesn’t define the idea of “meeting one’s housing needs”. 

More on the interpretation of the “meeting one’s housing needs” you can find in the question: How to understand the phrase “meeting one’s own housing needs”, which is a condition for getting a mortgage repayment holiday?

The act doesn’t say that the absence of mortgage entry into the land and mortgage register prevents one from using mortgage repayment holidays. It’s broadly known how long we have to wait for an entry. In accordance with the law, what counts is the fact and date of the contract conclusion.

The mortgage repayment holiday act doesn’t give an answer to this question, as well as any other interpretative tips. We hope it will be interpreted in favor of the customers, which means that one of the co-borrowers taking out a loan for meeting their housing needs would be enough. The safest option would be to wait for the bank’s directives on the topic.

Neither the fact of having a right to different properties nor the marital status of co-borrowers matters here. What’s essential is that the mortgage loan, which repayment they want to suspend, has been taken out to meet their housing needs.

Within the Young Adult Apartment program (MdM) the banks were planning different kinds of support. It seems though, that this type of loan could also be covered by mortgage repayment holidays on the basis of the principles in the Act of July 7, 2022, on crowdfunding for business ventures and assistance to borrowers. 

However, one should take a look at Art. 75 of the above-mentioned act:

„1. In the case of the suspension of loan repayment in full or in part on a basis different than specified in the Art. 73 (read on a basis introduced by Mortgage Repayment Holiday Act), the suspension period ends on the day of the application delivery to the creditor, which is mentioned in Art. 73 para. 5 (debtor application to use a mortgage repayment holidays).

  1. In the case specified in para. 1, in confirmation, which is mentioned in Art. 73 para. 10 (bank confirmation about the suspension of installment repayment within “mortgage repayment holidays”), a way of settling a loan repayment in relation to the suspension period ending is pointed out.

Then, if you took advantage of a different kind of help in installment repayment suspension, at the time of submitting an application to use the mortgage repayment holidays, the aforementioned type of help finishes. 

In that case, we don’t have to worry if we received the bank’s confirmation, i.e. we don’t have to wait 21 days for the mortgage repayment holidays to be acknowledged by the bank to be effective. However, it would be advised to submit an application before the required date of installment repayment i.e. in the example – before August 5, 2022. In accordance with the first bank interpretations, the application by the rule should be submitted at least the day before the installment repayment, though the applications submitted the day of could also be effective. You should follow your bank directives in that respect.

The act is meant to be understood that during the installment repayment suspension period the interest remains uncharged. Afterward, the customer doesn’t pay off the capital itself, but the capital with interest in accordance with the current at that moment rate of interest.

No, in this case, none of the installments can be suspended since none of the loans were taken out for an apartment, which was supposed to “meet borrower’s housing needs”.

Yes, it’s possible. The loan meant for mortgage loan repayment in a different bank could be susceptible to mortgage repayment holidays, as long as the second loan agreement was concluded before July 1, 2022. The act doesn’t refer directly to this instance, but it could be assumed it is still a mortgage loan taken out for meeting one’s housing needs. 

In case of mortgage loan refinancing agreements signed after July 1, 2022, it can’t be recognized as susceptible to mortgage repayment holidays (there’s no constant between the agreement to the first mortgage contract).

It’s not specified in the act, and it’s variously interpreted. According to one of the stations susceptible to moving are all the deadlines, another speaks only of deadlines related to the repayment schedule. In that respect, one should wait for the bank’s interpretation. 

According to ANG group experts, a person like that will be able to use mortgage repayment holidays, because there are no limits in the act in that regard. We assume, similarly to installment suspension during Covid19, age will not matter here.

Sadly, unused installment suspension passes. For example, if we don’t make use of installment suspension in August 2022, but only in the 3rd quarter of this year we use the suspension in September, afterward we cannot move the suspension from August to e.g. the third month of 4th quarter of 2022, or to the second month of suspension in whatever of quarters of 2023. We’re going to make use of only 7, not 8 installment suspensions. 

There are no such restrictions in the act. Whatever delays in installment repayment don’t make using mortgage repayment holidays impossible. 

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