Adjustable-rate loans are bad. You know that... I know that... most everybody that purchased a home leading up to 2007 knows that.
But although fixed-rate loans with 20+ year terms for home purchases are now the norm in the USA... in Poland, there is no such thing.
Despite not liking adjustable-rate loans, I decided to take one out and buy an apartment last year. The plan was (and still is) to divide this rather large apartment in central Poznań into 2 units, one which I will live in, and one which I will rent out. I figured the risk of the loan rate increasing dramatically was low enough...
... but of course, that risk is never zero.
... and of course, that risk came to fruition: the "Warsaw interbank offered rate" (WIBOR for short) — which greatly influences the size of my monthly payment — went from near 0% to 6% in the span of about 6 months.
The bottom line effect of that rise was that my monthly home loan payment went from about 2600 zł/ month to 4900 zł/ month. And at the moment, there are no signs that indicate the rates will come down any time soon. worse yet, they can just as well continue to go up.
Coming up with an extra 2300 zł or more per month ain't easy.
The coming few years will likely be tough for me from a financial perspective.
But if I make it through them, I should have:
- a nice apartment for myself to live in,
- a revenue-generating piece of real estate, and
- a palatable monthly payment thanks to the heavy inflation going on right now.
This rise in rates literally could not have come worse time because I literally just got the apartment... which means I have to spend a lot of money to finish it and it will not be generating any revenue that can help with the monthly payments until I get the rental unit finished. It's a little bit of a chicken-and-egg situation.
All that said, I don't regret taking out the loan. I am glad that I have an apartment, and I'm excited to finish it, live in half of it, and get the other half rented out ASAP.
I will learn a lot and in the worse case scenario: I will lose the apartment and a lot of my savings. In the grand scheme of things... that's nothing. Those are just things that are nice to have. My health and happiness are more important, and those are on the up and up.
Cheers, my friend — to you health and happiness! 🥰 🍻
