The loan may be used for the purchase of a property or, in the case of construction, to cover the remaining costs. In this post, I focus on the conditions to consider when purchasing a property.
Important:
• • The applicant must acquire 100% ownership (1/1 share) of the property. The loan cannot be used to purchase only a fractional ownership share (spouses may jointly acquire full ownership of one property).
• The acquired property may not be encumbered by usufruct rights.
• The seller may not be a close relative or partner of the applicant.
• If the seller is a business entity, the applicant may not be a member or shareholder of that entity, and the owner of the selling company may not be a close relative or partner of the applicant.
Who qualifies as a close relative?
• spouse
• direct-line relative (parent, grandparent, child, etc.)
• adopted, step- or foster child
• adoptive, step- or foster parent
• sibling
The selected property may qualify if it is:
• an inner-area apartment, residential house, farmstead (tanya) or agricultural residential centre (birtokközpont)
• suitable for satisfying residential needs
• maximum value:
- HUF 100 million for an apartment
- HUF 150 million for a residential house, farmstead or agricultural residential centre
• price per square metre not exceeding HUF 1,500,000
• purchase price deviating by no more than 20% from the value determined by the lending institution
What counts toward the floor area?
The regulation would be clearer if it referred to a legally defined floor area concept. However, it introduces a new approach.
Construction law defines “gross floor area,” “net floor area,” and “usable floor area,” but does not define floor area simply as “area” without qualification.
According to the Government’s explanation, the legislator’s intention in using the term “floor area” was to allow, in case of interpretative uncertainty, the application of whichever legally defined concept is most favourable to the applicant.
It is somewhat interesting that a new, potentially uncertain term is justified as a means of avoiding interpretative difficulties. In any case, this is good news for applicants, as it allows interpretation in their favour (or according to the financing bank’s requirements). For lawyers, however, it presents a challenge when determining the basis for specifying floor area in the sale contract. This will need to be examined case by case.
Update:: According to information provided by the Ministry for National Economy, based on a position agreed with the Hungarian Banking Association, where the Otthon Start decree refers to “floor area,” lending institutions will uniformly consider the net floor area of the apartment or residential building.
Suitability for Residential Use
This condition is assessed by the lending institution through an on-site inspection. Basic requirements include, for example, the availability of utilities, safety standards, and at least one habitable room.
If the lending institution determines that the property is not suitable for residential use, the applicant may still support compliance by submitting an expert opinion prepared by a certified construction technical expert.
In the next part of this article series, I will discuss the requirements concerning own contribution (down payment).
Is 10% really enough?