When you take a mortgage to buy a flat or a house in the primary market, you should also take into account finishing costs. Flats and houses purchased in the primary market are usually shell units, so they do not come even with window sills or basic sanitary appliances.
The prices of construction materials have increased by more than 6% during a year. The inflation rate during the same period amounted to 5.1%, which means that this product type became more expensive at a slightly faster pace than in case of other products. However, an increase in prices of construction materials was not homogeneous and mainly affected the finishing works sector which noted an annual price increase of approx. 20%. There were also strong fluctuations in the prices of construction materials, which could even temporarily reach the value 50% higher than a year earlier.
What is the cost of finishing a flat or a house?
The cost of finishing a flat or a house depends on various factors, including:
Residential area – a house with an area of 250 square metres definitely entails higher expenditures than a 50 sq. m flat. Even though there is no simple connection between the area and the costs, the area is definitely a decisive factor.
Finishing standard – The more luxurious the interior, the more expensive the flat will be. There is no upper limit to the costs. But there is a certain minimum to invest in order for the estate to be ready to live in.
Layout plan – The finishing of bathrooms and kitchens costs definitely more and these rooms are more difficult to finish than corridors, dressing rooms or even bedrooms.
Unique solutions – When you choose non-standard solutions, especially if you design them on your own, you should take into account increased costs.
Dates – Companies involved in the finishing of flats and houses are usually booked several seasons in advance. If you fail to order finishing works in advance, you will pay extra.
During the period before the prices of construction materials and labour increased, the finishing of a flat in moderate standard or a house in high standard cost approx. PLN 1,000 per square metre. At present, even higher costs must be taken into consideration. Having funds equal to 10% of the value of a flat or house for the purposes of finishing is an absolute minimum.
How to be financially prepared for flat finishing?
If you take a mortgage to buy a flat or a house, you should remember about the increasing costs of finishing. An amount of PLN 50,000 or even PLN 100,000 is a substantial expense for a person who takes a mortgage. But there are also several other options:
Own funds – The safest way to finish a flat or a house is to prepare an appropriate amount even before purchasing the real estate. If you have savings, you can avoid extra loan costs, and this will facilitate the planning of the entire operation.
But it must be remembered that the increasing costs of construction materials and finishing works are detrimental to those who would like to collect savings and buy later. An amount which was sufficient for finishing a house a year ago would definitely not be enough now. Some borrowers also have problems accumulating their own contribution to the mortgage and provision for finishing works.
Higher amount of a mortgage – Commercial banks in Poland are not very keen on granting loans in the amounts in excess of the amount spent on the purchase of the real estate. However, it is a good idea to negotiate and to present the real situation to a bank specialist. It cannot be excluded that a mortgage will be obtained in the amount sufficient for finishing or even equipping the flat.
Negotiations will be easier to conduct if you are building a house which can be secured with a plot of land and construction materials may cover part of investor’s own contribution. Unfortunately, it is not always possible to incur such a liability, but you can compare mortgages.
Extra loan to cover finishing works – Individuals who repay mortgages usually still have sufficient credit worthiness to take a special-purpose loan which is usually referred to by banks as a loan for redecoration. However, if you take an extra loan this will entail increased monthly expenses and may be a considerable burden on the household budget.
Finishing works in the flat and house as a challenge
An increase in the prices of construction materials and in the costs of finishing seriously affects the borrowers’ situation. If upon the collection of keys to a new house borrowers have no funds to finish the house, they may be in a very difficult financial situation because they will have to continue paying for the current flat (e.g. costs of lease) and simultaneously repay the mortgage.
For this reason, you should prepare in advance for taking a mortgage loan and consider not only high costs of finishing but also potential fluctuations in the prices of materials and availability of services. A reasonable borrower should not take a mortgage loan to the amount close to their maximum credit worthiness. Such a loan will be more expensive (low down payment insurance, weak position in negotiations with the bank) and will also be a considerable burden that will make it more difficult to collect the amount needed for finishing.
Source: financial comparison site finanse.rankomat