For a long time, I have been promising a synopsis of home savings plans, so I dedicated myself to writing the Great Home Savings Summary for you.
Because the topic is big enough, I put it in dots to make it easy to understand.
What is a Home Savings Fund or LTP?
A state-sponsored savings form, where the state pays our annual payment by 30%, but up to a maximum of USD 72,000 a year. As a result, the maximum amount that can be paid in case of home savings is 20 thousand forints per month, or 240 thousand forints per year. (The monthly minimum varies from company to company, ranging from 1,000 to 5,000.)
Usability of apartment saving:
However, the money collected here can only be used for housing purposes. This may include buying a home, buying a building site, buying into a retirement home, prepayment or early repayment of an existing home loan, or renovating, modernizing or expanding an existing property.
This year’s change is that now you can use the accumulated amount not only for a home loan, but also for a home leasing, or, if you have already replaced your home loan for a free use loan, you can prepay it. But if you have already redeemed it or taken out a loan for free use, that is not right.
There is a lot to do with renovation. Beyond classic painting, window replacement, attic installation and the like, anything you can’t take away from your property. It may have a built-in kitchen cabinet, not movable bedroom furniture. Air conditioners, built-in appliances, sidewalk, fence, gas installation, jacuzzi, solar panel, solar panel and much more are also eligible. Setting up a pool in the yard is not good, but once it has been dug and has a base, the same pool can go straight away.
It can only be used for real estate owned by you, unless the other real estate is officially in your possession, for example, you have a usufruct. (On transferability between direct relatives later.)
Only paper can be used for residential real estate. Many people live in outbuildings that have been listed in the land register as industrial or agricultural buildings. You can’t use that amount to use it for a dwelling in vain.
What tax should be used to recover the 30% annual state aid?
Good Finance. Unlike all other subsidized financial products, there is no tax refund here, but everyone is entitled to ‘30% of their annual payment’ on a ‘subject matter’ basis. Even if you do not pay taxes (pensioner, child, etc.)
What happens if I change the conditions for state aid on the fly?
In principle, contracts that have already been concluded are not affected, only those opened after the change. Until now it was still so.
Which Home Savings Bank Should You Choose?
The Law on Home Savings Funds even regulates how much you can charge as a monthly payment, so there is no such huge difference between home savings funds. However, there are differences in deposit and loan rates, for example GFI apartment savings have a minimum deposit rate of 0.5%, 3% the highest, Good Finance 1% and 3%, Daegon 0.75% only, Fyre 1 and 2 % products. (There are four players on the market, Fyre and Daegon being the two newest riders.)
There may be a difference in maturity, for example, GFI’s 4-year contract is 45 + 3 months and Fundamentá’s 49 + 3 months. If the most important aspect is to get your money back as soon as possible, then GFI is the winner. In other respects, another company may be the winner.
You can use the home savings calculator, and you can list results by several criteria.
What Are the Cost of Home Savings?
The biggest argument is the opening fee, which is usually one percent of the contract amount. The contractual amount is the amount of money paid over the term of the contract, the amount of state subsidies, the total interest plus the total amount of credit that can be borrowed (regardless of whether you want to borrow).
We quickly realize that the higher the monthly payment, the longer the term and the more loans you can borrow, the higher the opening fee.
In USD the opening fee is approx. It varies between $ 25,000 and $ 85,000 per contract if you want to save $ 20,000 per month.
Here’s a look at how much it matters when it comes to paying off the opening fee:
(Monthly USD 20,000, 1% interest “loan” product.)
In addition, you pay a monthly account management fee of $ 50, and if you make a request for a change, it is usually $ 2 each time.
What is the maturity of the home savings?
By law, a minimum of 4 years is a maximum of 10 years. If you give up 4 years ago, you will have to repay the state subsidies plus interest, but you will receive your capital and interest thereon. If you are bound for a longer period of time but use it after 4 years, you will receive government support if you prove the purpose of the home. If you have a 10-year contract but are already offended, ask for a contract amendment and use your home savings for four years.
There is still a 3 month waiting period after the expiration before I can pay this amount. However, it is possible to make a payment during this time, and there is state aid.
What are the Types of Home Savings Bank Contracts?
Home savings banks are not only suited to collecting deposits, but after that, we can use a low-interest loan for a few years for home purposes if we want.
The amount of this loan and its interest rate depend on how much and at what interest we have saved.
Therefore, we distinguish between “yield” and “loan” products, each with more maturity.
“Yield” products have a higher interest rate (2-3% depending on the company, Daegon only has a 0.75% product), the potential credit can be as much as we collected on deposit during the term. The interest rate on the loan is also much higher than the interest rate on the “loan” product than the interest earned on your own money during the collection period.
(Rumors say they want to eliminate 3% products because they are not worth the money in the current interest rate environment.)
“Loan” products have low interest rates (0.5-1%), in exchange for much lower interest rates on loans plus we usually get not only as much money as we have collected but also one and a half times more money.
If you are not expected to need a loan, or if you do not need it, just choose the yield product, since you have a higher interest rate on your savings, and the interest on a borrowing loan is only as much as we have received.
If you are in need of credit and get more then choose a loan product.
(Be careful, they often try to steer us towards the credit product, because of course it is better for companies not to borrow it.)
After the conclusion of the contract, the maturity can be changed, but the type (yield or loan) is no longer, so keep this in mind.
What is the interest rate on mortgage loans?
First note: forget about the generous interest rate, we always look at the APR. It sounds good at 3.9%, only if you have a management fee of 1% next to it, and not in terms of your current debt but at the beginning of the year, it quickly turns out that we have to pay much more.
A distinction is made between loans that are automatically accrued to the Home Savings Bank, whose interest rate is fixed and non-variable, and interest rates on other loans offered by Home Savings, which may change at any time if the underlying reference rate changes. (There is always a credit assessment, so only if you are creditworthy is the credit automatically.)
The amount of the fixed loan is equal to or equal to one and a half times the amount of our total savings, as discussed above. (That is, we are not talking about too much money.) These loans have a APR of between 5.23% and 7.8%.
These loan offers are now better on the market for normal loans, but keep in mind that while they can change at any time, they are fixed values. (Interest rates are currently at historical lows that may rise at any time. This will be good for depositors, but very bad for creditors.)
Good Finance also gives you other loans that are available at maturity but even at the start. Their interest rates are higher and may increase at any time. The APRs for these loans also seem to include state aid, otherwise the APR may not be lower than the interest payable, which is stated on the Good Finance page. Since there are management costs, handle the value of your loan interest carefully.
How many years is it worth to save for a home?
Now that’s it. Many people leak because they receive a 30% refund on their annual payments. Yeah, but that’s a big bonus as long as you’re at the beginning of the contract. (Just to make sure you don’t get government support for your existing money, just for your annual payments.)
In the first year, you pay a total of $ 240,000, for which you get a slight interest, plus $ 72,000 in government subsidies. So far, that’s super.
However, when you have $ 2 million in it, you still get only 0.5-1% or 3% interest and only 72,000 in state aid that year, which is only a modest 3.6% over the two million. To do so, you get the interest of 0.5-3%, still very faint.
That is why the 4-year, 1% interest rate product (EBKM) yields 10.56% with a token, only 4.99% for 10 years and even for home use. (EBKM means that if you were to pay that much money elsewhere, you would be in the same place as home savings, but you wouldn’t just have to spend on a home. That’s why the 4.99% off-the-shelf offer is considered. 7%, also free of interest on TBSZ account and not yet used.)
So, it is only worth saving for four or five years (9-14% interest-free yield, without interest tax), after which you have a radical advantage over other savings, while your commitment does not change.
But even the 3% interest rate is nice without government support.
This is a common mistake. Do not start with what the bank interest rate is today, but with an average of 5-10 years. If you think it will stay that low for years, then start investing in an apartment savings just for the sake of interest. The same is true for a home savings loan. At the moment, mortgage credit is not very competitive and deposit rates are attractive. But after an expected series of interest rate hikes, deposit rates will no longer be attractive, but home savings will be competitive again.
It is also worthwhile to tie a home loan with a home loan, taking advantage of state aid
This is another mistake. You will not win the maximum 10-14%, since the money you pay for home savings could also be paid on your loan, thus reducing your debt and thus paying interest to the bank.
Your gain is just the difference between the bank interest you pay and the yield on your home savings, which is no more than a few percent. If you manage to get a 4.99% 10-year contract on your loan with an interest rate of 7%, you will be downright overpaid for saving a home. I have already written more about this in Home Savings, the shop of the century.
So it’s worth it, but it’s usually pennies, if not at all, as much as people think. (Because they forget that they also have to pay interest to the bank for the same money. In fact, they invest in a home savings loan.)
What are the benefits of home saving?
Higher yields due to state aid, predictability, interest-free tax, guarantee of the OBA Deposit Guarantee Fund.
After the maturity date, you may still be able to take out a low-interest, fixed-rate loan from your home savings if we find it creditworthy.
What are the disadvantages of home saving?
It is only worth it with a short maturity, but within four years a very modest amount is raised, between 1.3 and 1.4 million forints. That is sweet enough to start anything meaningful with it, and plenty to just set it aside.
A recurring question during counseling is, “But what’s the miracle of saving my apartment ?!” And often there is no good answer. If you can’t make money out of your relatives, you’re just scratching your head at what to do with it, if you don’t have a home or mortgage, and the one million that you have will not have your own.
Therefore, get out of the magic of “30% state support” and think soberly about whether you will have a meaningful use in 4-5 years or just have a contract around your neck. Of course, for example, if you are collecting a planned home remodel, or if you have enough of your own to buy your apartment in 4 years time, then everything is fine, but this is less common. Most people go into it without knowing what will happen to the money in four to five years.
Another problem is that public subsidies are becoming more and more expensive, already over 35 billion a year.
Soon, one million families have a home savings contract with roughly four million households. If every family had a contract, the state would take it out of everyone’s pocket through taxation, which it puts into another’s pocket for state aid. People would appreciate their own money and get a 1% interest rate in return plus proof of housing. But very few people think this way.
Without government subsidies, the yield on home savings can be minus (!!) 1-1.5% per annum due to costs. In other words, they have an extra, well-meaningful return on state aid alone.
What happens if I do not use it for residential purposes or I cannot prove the purpose?
If you find out before you pay, that your home will not be matched, you will receive only your equity and interest, minus government grants and interest.
If you have already taken out the money with the government grant, but you do not produce the documents within the deadline (loan repayment, renovation bill, etc.), you will be asked to repay the amount. If you don’t, the state will enforce it like taxes.
How can you justify use?
Property record of purchase, building permit, credit institution proof of prepayment, and own name accounts for use. The date of the invoice cannot be older than the expiry of the home savings, so be careful. If there is no invoice for the work done, you may be asked by the appraiser to determine the cost of the work without material costs.
The Hungarian reality is that if you ask the master for a painting, window replacement, whatever, the work will be at least 30% more expensive, so the whole house-saving gathering is not worth it. In this case, you can take an invoice for the raw materials in your own name and ask for a valuation of your salary for something like $ 50.
How do I verify that the invoice renewal has actually been completed?
Not at all. Although it would be a theoretical opportunity, it would not be in the interest of homeowners and people would not be employed for such purposes. I haven’t heard of a case where they went to check it out.
Of course, if you submit a $ 5 million tile purchase bill to a 49 square meter panel, you may be wondering where you managed to use that much tile.
How can you multiply your monthly savings of $ 20,000 with home savings?
One person can be the beneficiary of only one contract at a time, so your options are quite limited. However, no one forbids you not only to make a contract for yourself, but to be a member of any line who does not already have a home savings.
In fact, after a couple of years of change, straight-line relatives can now offer each other their contracts after they expire. You can be a contractor of all and only your relatives are the beneficiaries.
However, be very careful about bonding with your children who are under 18 when they expire. Here, for more home savings, they ask for a guardianship license to use the money, whether you get it or not, or get the child a share in the property, which will suck later when you sell the house or take out a loan.
“Savings in favor of a minor or guardian homeowner or beneficiary shall not exceed seven times the amount of the minimum old-age pension or the amount determined in the decision appointing the guardian, but shall not be less than fifty thousand forints, unless the competent guardianship authority so decides.”
Interestingly, as far as I am aware, Good Finance does not require this certificate upon expiration. Therefore, do not prefer to save the apartment for your child, but rather for your parents and siblings, if you do, choose Good Finance.
Special conditions for opening
There are several apartment savers who take action periodically, but it’s a good idea to read the terms carefully. Often the action:
– It only applies to the inferior product with a lower interest rate, making you worse off than the higher interest product without action.
– You must also purchase from other products of the company (bank account, health insurance, etc.) and you cannot cancel during the term of your contract. Opening a bank account just for $ 200 a month to save 20,000 over five years is not a big investment.
– You get an interest, but only for one year. Just in the first year, when you don’t have any money yet. In the first year, even for a high-interest product, you get only $ 3,600 in total. Even if I triple this for a year, you won’t even have to fall back on paying 50,000 for the opening fee.