I got a lot of queries from blog’s readers who live (and work) abroad and are interested in buying a property in Poland on a mortgage. I wish everyone could become my client. Unfortunately, it is not that easy. In the following I will explain why.
[ Please note that all this does not apply to foreigners who work in Poland and earn in PLN. You guys can apply for a loan on the same terms as Polish nationals! ]
In Poland you can get mortgage only in the currency of your incomes
According to the Act on Mortgage Loan and Supervision over Mortgage Brokers and Agents, currency of the mortgage loan should match the currency of income. Citizenship doesn’t matter – a Pole who works in Ireland and earns in EUR can only apply for a mortgage loan in EUR in Poland. An Englishman (or Pole) working in England may apply in Poland only for a loan indexed in pounds sterling (GBP).
This regulation was first introduced as a recommendation of the Polish Financial Supervision Agency (KNF – Komisja Nadzoru Finansowego) and since 2017 it has been included in the Act on Mortgage Loan and Supervision over Mortgage Brokers and Agents. It is easy to guess that the intention of the market regulator was to reduce the exchange rate risk to which borrowers taking out a loan in a currency other than their income are exposed.
Only 2 banks come into play – Pekao and Alior
There are only two Polish banks that are offering a mortgage loan in a foreign currency:
So the first hurdle is the limited choice of banks, moreover, the terms and conditions of these “foreign currency” mortgage loans are more restrictive than those in PLN (details in the further part of the post).
You may ask: so what’s the problem? I earn in CHF so I’m going to take a loan in CHF in Poland. That way I won’t be exposed to the risk of exchange rate changes. Sadly not. Because none of these two banks offers credit in CHF.
In Poland, mortgages are available only in five foreign currencies: EUR, GBP, USD, SEK, NOK
- Pekao – EUR, GBP, USD, SEK, NOK
- Alior – EUR, GBP, USD
If you’re paid in a different currency than the five mentioned above, you can forget about a mortgage in Poland. If you live in Switzerland and earn in CHF, you have no way to get a mortgage in Poland because Polish banks do not offer mortgages in CHF.
If we turn back in time by, say, 12 years, in fact almost every commercial bank in Poland offered loans in CHF, as well as in other foreign currencies. There was even a bank that offered loans in Japanese yen (JPN).
However, the financial crisis put an end to this “Eldorado” and the previously mentioned Polish Financial Supervisory Agency (KNF) placed a series of restrictions on granting mortgage loans in foreign currencies, including the aforementioned principle that the currency of the loan must be consistent with the currency of the borrower’s income.
Okay, so I’m an American, I get paid in dollars, meaning I can buy an apartment in Poland on a mortgage in USD, yeah? Not necessarily…
If it were just about a small choice of currencies, it wouldn’t be so bad. The problem is that Alior and Pekao impose additional requirements which strongly limit the availability of credit for foreigners working abroad.
Alior – only for foreigners working in Poland
Alior employs additional restrictions. This bank credits in foreign currency only foreigners who live and work in Poland or Polish citizens who work abroad. If a married couple applies for a loan, let’s say a Polish woman and a French man both living and working in France, Alior will only take her income (Polish citizenship) into account to determine their creditworthiness.
You must have ties with Poland
These ties are basically one thing: you must have a partner (or spouse) who is a Polish citizen and will apply for a mortgage together with you. This is probably due to the fact that such a “bond” gives banks more guarantees that the loan will get paid off.
A different form of a “tie” may be of economic nature, namely ownership of another property in Poland, which could be presented as an additional collateral for a loan.
You must have a PESEL number
Both Alior and Peako also require every credit applicant to have a PESEL. PESEL is a number used for personal identification in Poland. In order to get a PESEL assigned to you, you must have a temporary or permanent address in Poland, that is to present to the municipality office for example a rental agreement with your landlord. An alternative to a rental agreement would be if someone living in Poland would register you on their property – you could then present the authorities with a certificate of residence.
Income from an employment contract only
This is another limitation. An employment contract is the only source of foreign income that Alior and Pekao will accept. Forget about a loan if you are self-employed.
Pekao and Alior – details of offers in foreign currencies
Now I will take a look at the offers of these two banks.
Pekao (EUR, USD, GBP, SEK, NOK)
- loan for a maximum of 20 years, minimum own contribution 40%.
- for loans up to 15 years, a minimum own contribution of 30%.
The bank applies a variable interest rate being the sum of the base rate and the bank’s margin. The base rate for a housing loan is calculated on the last business day of each calendar month as an arithmetic mean of all quotations of the respective rates:
- EURIBOR 3M – for loans in EUR,
- LIBOR USD 3M – for loans in USD,
- LIBOR GBP 3M – for loans in GBP,
- STIBOR 3M – for loans in SEK,
- OIBOR 3M – for NOK loans,
published in the last calendar month preceding the accounting period for which it is determined. The bank updates the base rate every 3 months.
The margin added by Pekao is 3.9 p. p. (it applies to all currencies). The base rate for e.g. the EUR is – 0.32 (yes, it’s negative). Accordingly, the interest rate will be 3.9 – 0.32 = 3.58% (variable rate updated every 3 months).
You can check current and historical rates here: (link)
More about interest rates you can find in this post: Mortgage interest rates in Poland – all you need to know
Additional fees & charges
- arrangement fee 1,99%
- bridge insurance (till mortgage register entry) – interest rate raised by 1 p.p.
- early prepayment fee in the first 3 years – 3%
The bank demands opening of a personal account with a debit card and a monthly deposit of at least twice the credit installment. If the customer does not meet these conditions, the credit margin increases to 5.9 p.p. (that is: the interest rate will be 5.58%).
If there is only one borrower with income, the bank requires life insurance covering at least 25% of the loan amount. The customer is free to choose any insurance company on the market (employee policies are also accepted).
Alior (EUR, USD, GBP)
- maximum loan term – 30 years
- minimum own contribution (down payment) – 20% EUR, 24% (USD, GBP)
The bank applies a variable interest rate being the sum of the base rate LIBOR 3M and the basic margin of the bank, which in this case is 4.5 p.p. LIBOR 3M for EUR is – 0.36% (negative), so the loan interest rate will be 4.5 – 0.36 = 4.14% (variable interest rate updated every 3 months).
Additional fees & charges
- arrangement fee 2%
- bridge insurance (till mortgage register entry) – interest rate up by 2,5 p.p.
- early prepayment fee in first 3 years – 2,5%
If you want to learn more about fees & charges check out this post: Buying a flat on a mortgage – let’s calculate initial expenses
Further requirements & informations
- if the own contribution (down payment) is higher than 30%, the margin will drop by 0.2 p.p.
- the bank can reduce the commission to 1% and the margin to 3.3% provided the customer buys a life insurance policy from the bank (the insurance rate is 5% of the loan amount, to be paid in advance).
- in the case of a loan over 1 million, the bank decides upon the margin size individually (negotiation)
- if there is only one borrower with income, the bank requires life insurance in the amount equal to the loan amount. The customer can choose any insurance company on their own.
- at least one of the borrowers must earn the equivalent of PLN 5000 in the given currency.
The loan will be indexed to a foreign currency
In both discussed banks, the loan is indexed to the currency in which you take the loan. This means that the bank will pay a fixed amount in PLN (transferred directly to the vendor’s account). The loan agreement will specify the amount in PLN and on the credit disbursement date this amount will be converted into a given currency (e.g. EUR).
Both banks will convert the loan amount into a given currency but in two different ways. Pekao will convert the loan at the average NBP rate and Alior will convert the loan at its currency purchase rate on the loan disbursement date.
The bank will provide you with a loan repayment schedule in EUR and you will be able to choose whether you want to repay the loan in EUR or in PLN.
Let’s say that you meet all the above mentioned requirements to apply for a mortgage in Poland. Below you can find a list of documents that you will need to apply for a loan:
- proof of income (a completed bank form)
- employment contract (translated by a sworn translator)
- annual tax return (translated by a sworn translator)
- bank statement reflecting your monthly salary for the last 12 months
- a report from the Credit Scoring Agency relevant for your country (e.g. Experian, Equifax).
I hope that this article will help you understand the mechanisms of Polish mortgage market. If you would like to ask me about something else, write to me at firstname.lastname@example.org. If you would like to learn more about the Polish mortgage market, I encourage you to read the following articles: Why use a mortgage broker? How it works in Poland or 6 myths about getting a mortgage in Poland.