The baby loan, as described in the decree, is most similar to a freelance personal loan, as the application does not require any own funds and real estate cover, and the amount borrowed can be used for any purpose. In practice, however, it is not that easy to buy real estate or replace your existing loan with a baby loan.
The maximum claim of a $ 10 million baby loan alone is hardly enough to buy a property in good condition today. It is no accident that some claimants want to supplement their interest-free loan with Good Finance or, if that is not possible, with another market-rate home loan.
It is possible, but in this case, the banks may impose additional conditions. The prudence is not surprising since these are large loans and contracts of several decades.
In practice, this means that if you tell the bank that you want to use the baby loan to buy a property, you may decide to apply for a purchase agreement as a condition for disbursement. This occurs when you apply for a baby loan and a home loan at the same time. If you do not want the bank to set conditions for spending a baby loan, you should wait 90 days between applying for the loan.
The baby loan can be used as own funds, up to 75 percent, according to the National Bank of Hungary’s Debt Brake Regulations, if you want to apply for a mortgage and buy real estate together.
The 75 percent rule is no longer valid after 90 days, so if the 90 days between the two loan applications have passed, you can use the baby loan as you wish – so you can use up to 100 percent of the amount as your own. Applying for a home loan without other resources is also possible.
Even before the baby loan, redemption was not standard practice at banks, so it was to be expected that not all conditions would be the same in this case. Baby loans can be used by claimants to redeem one of their existing (or even more) loans, but they must also meet the conditions set out in the Regulation and the bank credit assessment.
The most important issue when redeeming a loan is whether or not you have to meet your income expectations with or without the repayment of the loan to be repaid. It depends on your banking practice, as well as whether you can redeem your credit with the same credit institution where you applied for one.