The government has announced in the government news that from 2019 Loan will also benefit from a two-child discounted home loan, while three-childers can apply for a subsidized interest rate of 15M for the state instead of 10M! The collateral will be the money saved by ditching the house. How will this affect the real estate market? Is this good for us?
Is the collateral the money saved by ditching the house?
In the press and in statements it is common to mix two statements and raise to the same level:
- housing savings cost 72 bn a year (which, according to NGM, is 61.6 bn HUF)
- to save money saved in Loan by abolishing state aid for housing savings
These two statements in the next few years should not be in a causal relationship at any level!
Think about the fact that the existing housing savings contracts concluded until 16th December 2018 are covered by state support until the end of the agreed term. So, as far as the sector in 2017, the state put 61.6 billion forints, this obligation will continue in the years to come, until the contracts run out.
According to the calculations of the world economy, in 2017 slightly more than 100 000 contracts were concluded with an average deposit of 17 000 forints. This means that the Hungarian State can save 100 000 x 17 000 x 0,3 = 510 million less state aid to be paid each year.
In 2019, HUF 510 million
In 2020, HUF 1 billion
In 2021, the system saves 1.5 billion forints in this way.
The August article of the index revealed that families benefited from HUF 20 billion last year. Nearly half of the applicants used Loan10 + 10 support. In addition to these amounts, it is simply dwarfing what the system will save in the next few years on home savings!
The supported loan was extended and not Loan
At the moment, the government has expanded the amount of credit available to Loan and the number of eligible persons. Buying or building a newly built apartment only!
Already, the two children can add a 3% interest rate 10M forint to the 2,6M Loan.
The 3-year-olds will be able to buy a 15M HUF 3% interest rate loan from Loan next to Loan from 2019.
Instead of housing savings, we get a cheaper loan. It will be good for us?
Now we will calculate which families who needed credit for buying a home / building, what version do they have / have done better if they wanted to repay the 10M HUF home loan in 10 years?
Our starting point is, in fact, that families with two children have “won” HUF 416 640 over a 10-year period, having the opportunity to take a 3% loan, compared to a 44,450 forint deposit with a fixed interest rate of 10 years fixed for 25 years ( 3db) against a loan combined with housing savings.
if the same family would have made for any housing purpose +1 ten year old, 20e forint housing savings, then they failed to provide 720,000 fort state support. In Hungarian, 720,000 to 416,640 Forints – – 303,360 Forints will have less wealth – this amount of money will fall to the full picture in this particular life situation.
If you did not cover the new loans from the house savings, it would have been even better.
As long as the housing savings and the Loan 10 + 10 M concessionary lived alongside, many families chose the solution to take the Loan 10M loan for 25 years (maximum maturity) and next to the house savings:
So far, the best thing to do was to combine the housing savings with the subsidized loan, which saved nearly 1M for the subsidized loan. However, the range of eligible persons was fundamentally limited, as only families with 3 or more children could use it for newly built property.
The government was extended by the government.
HUF 400,000 tax exemption for three children
We often forget about the property tax, but it can be a very serious item. In this article, I will explain in detail, through a concrete example, what it is and what does not involve exemptions and exemptions.
What is important to us is that the tax exemption only involves the amount of Loan, ie we must deduct the amount of the subsidy from the purchase price. In the case of the three children, in the case of Loan 10, the 10M forint must be deducted in full, so we do not have to pay the fee.
Unfortunately, the same exemption does not apply to the preferential loan, so we have to pay the 4% property tax if we are not entitled to any discount.
Loan 2019 counterbalances Good Lending tightening
It is important to note that the new Good Lending Code, which came into force on 1 January 2018, can fully cover our camels, because of the 10M HUF supported loan already available to two children at Loan 2019:
State-supported for 25 years, max. 3% interest rate loans have a 5-year interest period, which the ABC wrote to me:
32/2014 on the regulation of the installment-based repayment installment and the loan coverage ratio. (IX.10.) The ABC Decree distinguishes between two cases for the burden of income in the case of loans with state interest subsidy.
In the case of loans granted for a maturity not exceeding the state interest rate subsidy period , the income-related installment indicator is determined by the length of the interest period during the interest subsidy period.
In the case of loans with a maturity over the government interest rate subsidy period , the interest period used in the period after the interest subsidy period is relevant.
If you take out a loan with a 5-year interest period, the income-based installment index should not exceed 35%.
Since we want to buy HUF 10M (or 15M from 2019), we have no choice. We have to count on a 5-year interest period, which means that from 2019 the free income (existing loan repayments must be deducted) may be 35% of the subsidized and unsupported home loan under the certified net income of 500,000 HUF.
Let’s look at a calculation:
Our verifiable income is HUF 450,000. We currently have 2 student loans (10-10e forints to be paid off), and we have a credit card with a 300,000 HUF frame that is not used (5% of the total amount must be taken into account). Therefore, our free income is: 450,000 to 35,000 = 415,000 forints, 35% of which can be used, ie 145,250 forints.
Families with two children had to solve the situation with market credit so far. In the case of a market loan, with a 10-year interest period, the payload of the income is 50% (from 2019 it is possible to prove HUF 500,000 under income): HUF 207,500,
Thus, the maximum amount of credit that can be taken in this case will be around HUF 31M for 20 years at current interest rates. (if interest rates rise, the amount of credit can be reduced).
On the other hand, in the case of a loan of 10M forints, which can be claimed from Loan 2019, the loan amount to be raised is 10M subsidized loan + 15M HUF market loan. So, with this discount, the government actually offset the credit crunch caused by the Good Lending tightening and, on the other hand, “forces” families to mobilize higher levels of self-sufficiency when they apply.
VAT on new homes will increase by 22%, which does not necessarily mean a 22% price increase
I have a conversation about two years ago when a construction contractor asked me for help with Loan and VAT. When I asked how to handle the 5% transfer of 27% VAT purchased, he shrugged and said:
Not at all. We simply raise the net value and incorporate it into the price. This is even better, because then we do not have to wait for our money.
It was right, because the construction industry re-priced itself and incorporated the VAT differential (+ a very significant part of Loan support) into the net price. It is becoming increasingly clear to me that raising VAT will not necessarily drastically raise prices.
Rather, I see real reductions in net prices, a rise in VAT and a minimum net price increase of 5-10%, which entrepreneurs will justify with the increase in VAT.
The nightmare of the constructor is a 10M subsidized loan for the two children
Namely, due to the Good Lending rules, the credibility of families simply deteriorates as, due to the subsidized loan, 35/45% income financing can be granted less, as in 2018.
Of course the question is volume. It should not be forgotten that the demand market and the housing savings of the population have dropped dramatically in recent years. Those who wanted to buy a home, most of them (the crowd) had already entered something. For Loan 10 + 10, 10M forint support is an important factor, which is a part of self-help.
In the case of two children, instead of the 10M, the 2.6M self-sufficient will remain, which can give thought to all families that it is worthwhile to move to a newly built apartment for them? If so, where do you get the required self-effort?