Bigbank Latvia launches home loans with up to 20-year grace periods
49% of Latvian people aged 18 to 29 would like to buy real estate or would seriously consider buying it, if the monthly payment in the first years of the agreement were significantly lower than the rent, according to a survey conducted by the research centre Norstat Latvia in May this year. Responding to the needs of the public, Bigbank Latvia has, for the first time in its history, started offering a mortgage loan with a deferred payment schedule. It provides the possibility for young families not to pay the principal amount of the loan for up to 20 years, thus only paying interest payments at the beginning of the loan term and postponing the principal payments until a later time, when the income has increased and the children have grown up.
Buying a home for young families is a challenging and often unattainable dream. The income of young people is not yet high enough to make a long-term commitment with a monthly payment of several hundred euros, and the funds are needed to care for the children. As a result, families are forced to pay high rent for living in an apartment belonging to somebody else instead of investing money in their own, which is a disadvantageous use of money in the long run.
To help young families, Bigbank Latvia has prepared a special mortgage loan with a special repayment schedule. It provides for a loan of up to 200 thousand euros with a term of up to 30 years, where for the first 20 years, only interest payments can be paid. Thus, during the period of stabilisation of the young family, the monthly payment for housing can be up to three times lower than the rent to be paid per month for equivalent housing.
“During the pandemic, when housing went from a place to spend the night to the office, the school, the kindergarten, the gym and the dance floor at the same time, every individual realised the true meaning of a comfortable place of residence. This is evidenced by high activity in the real estate market and the construction of new homes. With this special mortgage loan, we also want to help young families get their homes, while saving money for other important needs, such as furnishing a home. The data of the Norstat Latvia survey show that almost half of the respondents aged 18 to 39 would like to spend funds on exactly this instead of paying for a loan. Another quarter would like to invest in their education, thus increasing the potential to earn more in the future,” says Ģirts Kurmis, CEO of Bigbank Latvia.
The viability of the loan is confirmed by a simple calculation. When purchasing a two-room apartment in a new project in Riga for 100 thousand euros, where the loan amount with the Altum guarantee would be 95 thousand euros, and applying for a 30-year loan with a 10-year special repayment schedule, the first 10 years monthly payment will be 200 euros, and the following 20 years - 505 euros. Renting an identical apartment costs about 645 euros per month. This means that for the first ten years, the family will save 445 euros a month. In addition, for families with children with a steady income but not enough savings to make the first instalment, Altum offers a state guarantee, reducing the first instalment by up to 5%.
Bigbank Latvia also offers a mortgage loan with an annuity repayment schedule, which provides the same monthly payment throughout the entire loan term and a linear repayment schedule, in which the monthly payment decreases with each month. In both schedules, the loan is available for up to 300 thousand euros for up to 30 years, and the Altum guarantee for families with children.
The mortgage loan is the latest offer in the rapidly growing Bigbank Latvia loans portfolio. The bank has recently started offering loans for the purchase of agricultural land and forests, and the volume of loans issued to companies is growing very rapidly. In the 1st quarter of 2021, it increased by 201% compared to the 1st quarter of the previous year.