Is “Mieszkanie na Start” a failure? Oppenheim for “Wprost”: This is the EKO Kredyt program

Yes, the “Mieszkanie na Start” project was created, but after the first reading it turned out to be a failure. Similarly to the previous government's program “Safe Credit 2%”, about which I have already commented in “Wprost”.

Based on my own extensive experience in the “mortgage” market, where I have been operating continuously since 1998, and also as a person who has been operating in the “residential” industry for over 20 years, I decided to devote my time to creating a program that would significantly allow us to move the market housing – with the help of financing the purchase of real estate through a new form of mortgage loan. I called this program: EKO Loan for the Purchase of a Apartment.

Main assumptions of EKO Kredyt

1. EKO Loan is a mortgage loan that can only be granted for the purchase of an apartment.

2. Every adult citizen of the Republic of Poland can benefit from EKO Loan. Necessary condition: creditworthiness.

3. One person can purchase 1 apartment through EKO Kredyt (no more). Except for married couples: in this case, it is possible for spouses to purchase 2 apartments, provided that they (the spouses) have creditworthiness for the above.

4. EKO Kredyt's own contribution: min. 20 percent apartment prices

5. Assumed loan period: 10 to 20 years. Possibility to extend financing (on the same terms) if the borrower is creditworthy after the end of the contract. Other options: selling the property or changing the borrower, e.g. an adult family member.

6. Interest rate: 5 percent per annum (for the first 5 years), fixed interest rate.

7. Mandatory monthly repayment of the EKO Loan: only interest on capital, taking into account the provisions of point 8.

8. Possibility of additional higher repayments (i.e. beyond the current interest) – each additional payment is counted towards the principal repayment and reduces the amount of interest on the next installment.

9. Any overpayment of capital (point 8) is exempt from fees and commissions

10. Limitation of the EKO Loan amount to PLN 1 million.

A serious loan program, and the installment… ridiculous

I consider the most important features of EKO Kredyt to be those listed in point. 6.-9. If you do not yet see the strength of the described concept from the above “dry” description of the assumptions, first take a look at the monthly installments (mandatory repayment) of such a mortgage loan:

When the amount of EKO Loan is PLN 500,000. PLN, installment = PLN 2,083.33

When the EKO Credit amount is PLN 200,000. PLN, installment = PLN 833.33

Such a low installment is possible due to the assumption that repayment of the capital is not obligatory.

But of course it is recommended: thanks to possible overpayments – which are allowed at any time, in any amount and without any fees to the bank – you can reduce subsequent installments. Because this, i.e. current interest, is calculated only on the current amount of capital remaining to be repaid.

What does EKO KREDYT have to do with ecology?

A little about the name of the project. It is common knowledge that today everything that is “eco” sells better. However, when creating this concept, I was not guided by the ambition to save the planet, although this is very fashionable today. In this case, the name “EKO” is an abbreviation of: Flexible Interest Credit.

Why “interest” – you can see from the main assumption, “flexibility” is not only the possibility of any overpayments of this obligation – without additional costs and annexes. It is also possible… not to repay the debt after the end of the contract.

This is another – completely new – solution, which involves an easy “exit” from EKO Credit, without having to repay it. An adult family member can take over the debt – also after the period when the loan agreement has theoretically ended – provided he or she has creditworthiness.

But it can also be a non-related person: the bank's acceptance of such a “substitution” of the borrower and the change of the owner of the apartment are enough.

One of the spouses can also “leave” the EKO Loan without any problems – this is a situation where the EKO Loan was granted to both spouses and the relationship falls apart. Here, all that is required is an agreement between the borrowers and the creditworthiness of the spouse who is to remain in the apartment and continue to repay EKO Credit.

Benefits of EKO Credit

Given the assumptions described, it is worth considering the advantages of such a concept in more detail. Especially in comparison to other government programs known to us from recent history (these were, in order: “Rodzina na Swoim”, “Mieszkanie dla Młodych”, “Safe Credit 2 percent”). Below I list some of the benefits and advantages of EKO Credit:

• EKO Kredyt does not require any subsidies from the budget

• Increases the availability of a loan for the purchase of an apartment: by lowering the creditworthiness threshold (lower installment)

• No interest rate risk

• A simple program that does not require complicated IT programs or related expenses on the part of banks (e.g. when settling subsidies)

• FLEXIBLE – the borrower decides on the speed of capital repayment

• SAFE: both for the borrower and the bank

• Significant impact on the development of housing construction, especially in small and medium-sized cities

• Reduction in apartment rental prices: if you have a stable income, it will be more advantageous for a given person to buy an apartment rather than rent it (at current rental prices)

• Possibility of simple “taking over” of the EKO Loan debt by the borrower's adult children

• Enabling the purchase of a flat for people with low income

• Making work outside large agglomerations more attractive: the possibility of having your own apartment and, consequently, a sense of stability, may encourage you to look for work in smaller towns and medium-sized cities, especially since the costs of living there are also lower than, for example, in Warsaw, Krakow or Tricity

• Encouraging borrowers to spend wisely: every PLN 100 saved can be used to repay the principal

The described concept, which was created in my head very recently, at the end of January this year, gained the interest and praise of several experts who had the opportunity to familiarize themselves with the assumptions of EKO Kredyt.

One of such people is Dr. Krzysztof Czerkas: a person associated with mortgage banking and the housing market since the 1990s. As part of our cooperation in this area, Krzysztof Czerkas added something of his own: it is a concept of building apartments for rent, it is an improved version of the “Mieszkanie plus” program, which was supposed to be a hit of the previous government, but – as we know – it did not really succeed.

Will the presented concepts gain the interest of our authorities? I will not answer this question. I will be happy to discuss the solutions described.

Krzysztof OPPENHEIM: financial and real estate expert, specializing in, among others, in mortgage loans, entrepreneur. Since July 2016, he has also been running an anti-debt collection law firm, specializing in: consumer bankruptcy, assistance for indebted entrepreneurs, and Swiss franc disputes. Member of the Working Team for Restructuring and Bankruptcy at the Entrepreneurs' Council at the Ombudsman for Small and Medium-sized Entrepreneurs. More information at: www.krzysztofoppenheim.pl and www.oppen-kredyt.pl.