As noted by Rasa Narė, Head of the Baltic States Customer Experience Improvement Center at Citadele Bank, the most important decisions in the home buying process are often made even before choosing a specific property – when planning the budget and assessing all possible expenses.
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“Challenges most often arise when not all expenses are included in the initial plan. There are many cases where clients focus mainly on the monthly payment but do not assess the full scale of the transaction. Later, this simply starts to be felt, both when making financial decisions and living in the new home,” says R. Narė.
Initial expenses – even before signing the contract
As the expert points out, even before concluding the deal, buyers face mandatory expenses that are often not included in the initial calculations. One of these is property valuation, which the bank requires to determine the objective market value of the home. Although this service usually costs several hundred euros, without it the loan cannot be granted at all.
Next come notarial actions and registration – confirmation of the purchase-sale agreement, registration of ownership rights, registration of the mortgage. These expenses fall on the buyer and must be covered from their own funds.
“At this stage, the most important thing is not the expenses themselves, but their timing – most of them arise before the transaction is completed and must be paid immediately. If they are not assessed in advance, a situation may arise where there are enough funds for the home but not enough to complete the transaction. Therefore, it is recommended to plan for these expenses when budgeting,” says R. Narė.
The total price is also determined by the type of interest rate
According to her, when further evaluating a home loan, most attention is usually paid to the interest rate, but this is only part of the total loan cost. Other fees, such as contract conclusion or administration costs, also contribute to the final amount.
“It is important to look not only at the interest but also to assess the entire loan cost. Only in this way can different offers be objectively compared and a decision chosen that is sustainable in the long term, not just attractive today,” says R. Narė.
Equally important, according to her, is the decision regarding the type of interest rate. The current market situation encourages a more careful evaluation of the choice between variable and fixed interest rates – this is a question faced by almost every home buyer.
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“Variable interest rates may be more attractive in the short term, but they directly depend on market changes. Meanwhile, fixed interest rates provide more stability and allow for more accurate financial planning over a longer period. The decision should not be made solely based on what is cheaper right now – it is important to assess your income, financial commitments, and how you would feel if the interest rate environment changed,” comments R. Narė.
After a successful deal – expenses do not end
The expert notes that when purchasing a home, it is important to consider not only the real estate price itself but also all additional expenses. Some of these arise after the transaction – for example, home insurance, furniture, or household appliances. However, when buying a newly built home with partial finishing, installation costs must be planned even before signing the purchase-sale agreement, as they can constitute a significant part of the total amount.
“If necessary, a home loan can be granted not only for the purchase of the home but also for its installation. However, in practice, we often see that clients tend to underestimate the real costs – they plan that savings will be enough, but the final installation estimate often grows by about 30%,” says R. Narė.
According to her, some clients initially decide not to borrow for installation but return after a few months asking to increase the loan amount.
“Often after 3–6 months it turns out that the planned funds are not enough. Then the loan agreement and mortgage have to be changed, which means additional costs. Therefore, in many cases, it is more rational to confirm a larger amount for home purchase and installation right away – if it is not needed, the unused part simply remains unused, and interest is paid only on the amount actually used,” notes the expert.
The bank representative emphasizes that purchasing a home should not be viewed only as a one-time transaction – it is a long-term financial commitment that requires thorough preparation and a clear understanding of your financial capabilities.
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