It doesn’t even have to be a mortgage for a large apartment, yet for some clients, the repayment suddenly jumped by CZK 10,000 per month. He suspects they won’t make it. “Don’t wait for the bank to call, call yourself and make it their problem,” advises the ex-banker.
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The first mortgaged houses are already starting to appear, which the owners have not even occupied yet and are already getting rid of them under pressure. This is a last resort. Former director of Raiffeisenbank Lubor Žalman believes that there is a way out of almost every difficult situation.
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“If a person is in trouble today, it does not mean that he will be in trouble three years from now. The Chinese character for the word change consists of two characters, one for threat and the other for opportunity. What prevents me from looking at the job market if I wouldn’t get more elsewhere? To go to the boss and say: you haven’t raised my salary for three years, will you pay me back?” he says in the Ve váte podcast.
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However, according to the expert, the first route for a client who does not have repayments should be to the bank. Because his repayment problem is just as much the bank’s problem.
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“Tell them, I won’t be able to pay, I can’t afford it. What will you do with it? Suggest something to me,” advises Žalman, whose company EnCor Wealth Management today manages the investments of prominent clients.
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Lubor Žalman
- 2004 to 2012 – Chairman of the Board and CEO of Raiffeisenbank
- worked for Home Credit International in Russia and was a consultant for McKinsey & Company
- 2017 – co-founds EnCor Wealth Management, which manages finances for more affluent clients
- Twitter: @lzalman
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There are several options for adjusting the payment that has suddenly skyrocketed. Negotiate with the bank to reduce the installments or postpone the installments, consolidate or refinance the loan. According to a survey by SZ Byznys among financial institutions, the number of clients who would need to adjust their installments has not yet changed much against the “normal”.
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“It must inevitably come, but I think the banks will bear it, they have a cushion,” Žalman asserts.
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How can clients handle higher installments?
The first instinct is to negotiate a reduction in installments with the bank. However, it is necessary to take into account that the repayment period will be extended, and the loan will thus become more expensive. “I pay interest longer, so I pay more in total interest. In addition, I will fix for a higher rate,” reminds Žalman.
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Loan refinancing is also a chance to reduce repayments. Take advantage of the competition between banks on the cooling mortgage market, urges Lubor Žalman, and you might get a better interest rate or lower repayments. “Unemployed brokers have nothing to sell. Until now, the banks’ mortgage portfolios have grown by double-digit percentages, and they want to continue providing those mortgages,” he says.
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Each new fixation is a bit like taking out a mortgage again. “If I am comfortable, I will only deal with my bank. If I put some work into it, I will tell the broker if he could get me better terms elsewhere, either a better interest rate or lower payments elsewhere. This is where financial advisors add more value,” says the ex-banker.
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Be careful with deferred payments
By temporarily postponing repayments, the client does not solve the problem, it just rolls it over. But according to Žalman, it makes sense when there is a turn for the better on the horizon. “It makes a lot of sense when changing jobs. I have 5 months notice, then I will have a new job and a higher salary. Then it’s okay to postpone the mortgage,” he claims.
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However, a negative entry will eventually land in your credit register. In addition, some banks allow only one repayment deferment, so it is wise to “save” it for the worst times.
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Those who have several loans can achieve a reduction in repayment by consolidating them. Most financial institutions set their own rules. In some places, for example, it is not possible to consolidate leasing or microloans, in other places you will not be offered any credit products from non-banking companies.
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Another way to a manageable repayment can be to increase the mortgage. “If someone took out a mortgage many years ago, their property may have a much higher price. He can increase the mortgage and thus pay off consumer loans. The mortgage rate is lower and the period to maturity is much longer, so the repayment can be much smaller,” reminds Žalman.
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Listen to the entire episode in the player at the beginning of the article.
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In cotton wool
Podcast of journalist Markéta Bidrmanová and her guests. Hear advice from well-known investors and experts on investment, inflation, credit and mortgages. A financial “pocket” for everyone whose money is not stolen.
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