Financial education campaign “Make Sense of Money”: the mortgage loan
Automatically translated summary. The full text is available in Romanian.
As part of the financial education campaign “Make Sense of Money”, this explainer describes what a mortgage loan is, how it differs from other credits and what borrowers in Moldova should watch for. It was funded by the British Embassy in Chișinău through the Good Governance Fund.
A mortgage loan is a credit used to buy or renovate a home, secured by another property or by the purchased home itself, in which case it is called a mortgage credit. It runs for up to 25 years, requires an own contribution of 10% to 30% of the loan value and a stable income, with the monthly instalment not exceeding 50% to 70% of that income. Job security matters given the long term.
Loans may be in national currency (MDL) or linked to a foreign currency (USD, EUR). Foreign-currency loans usually have a lower effective annual interest rate, but instalments rise if the leu depreciates, so borrowers are advised to borrow in the currency of their regular income. Mortgages from national institutions carry a floating rate: on an MDL 600,000 loan over 20 years, a 1 percentage point rise in interest raises monthly payments by almost MDL 400.
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