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In the previous post, I mentioned that I bought a house, and it was possible because my wife and I qualified for the Bezpieczny Kredyt 2% program (abbr. BK2, which can be translated to english as Secure Loan 2% programme). In this post, I will briefly share how it looked from my perspective.

How it started in my case

As I wrote in the linked post above, I did not plan to build/buy a house in such a short timeframe. It must be acknowledged that the BK2 program is what made me decide to do it at all. I learned about it entirely by chance from one of the episodes of the podcast Personal Finances of Marcin Iwuc. Without much thought, I entered the relevant phrase in the search engine and started reading subsequent articles outlining the principles and rules of this program. It turned out that as a married couple, we met all the requirements, and the program itself was quite an attractive option. After this initial exploration, I concluded that we basically have three inconveniences:

1. I discovered the existence of the program only in September, and it has been in operation since July, with announcements made even earlier, so I came across information about it very late, which means I will have to act under time pressure,
2. the limit for the loan amount we can take is 600 000 PLN, and we can only add 200 000 PLN of our own contribution, so the property we are looking for cannot be more expensive than 800 000 PLN,
3. there is a high probability that the program, despite being planned for the next years, will probably be suspended for about 2-3 years after the first year, completely terminated, or its rules will change. Why? Because the interest exceeded all the expectations of the people who created it, and all budgeted money, including those for the next 2-3 years, will be used up after the first year of the program’s operation.

The above information is based on what I managed to read in September 2023 and is my knowledge at that time. Now, as I write this post, I can say from a future perspective that indeed, applications for the BK2 program were suspended at the turn of the year, and the program itself is expected to return in a slightly different form only around mid-2024.

What is this program at all

Is it worth writing about what BK2 is when it has been suspended and will only return in six months, moreover in a changed form? I think so, because I don’t believe that much will change in its operating rules. Therefore, I will continue to write as if the program is still in effect.

I don’t want to elaborate too much, so I’ll briefly explain what this program is about, and for those more interested in details, I encourage you to read on your own. BK2 is a government program of the Ministry of Development and Technology, which is part of the First Home program. It is a proposed solution to the problem of high interest rates and reduced access to loans among Poles. In practice, it is a program in which the State helps young people who want to buy their first apartment/house. The conditions to participate in the program are essentially only two:

1. participants must not exceed 45 years of age (in the case of marriage with at least one child, it is sufficient that one of the spouses is below 45 years of age),
2. participants must not have had (never) an apartment, house, or cooperative right to a premises or house.

It must be acknowledged that this program does not discriminate based on conditions. It was supposed to be for the young, so it is for everyone below 45 years of age. It was meant for buying the first property, so anyone who already owns any property cannot be a beneficiary. Simple and fair. When I first read about BK2, I was just waiting to finally learn about some income criterion, which usually excludes honestly working and normally earning (tax-paying) citizens from such programs. However, in this case, there is no such thing, which is a big surprise for me.

How it works (example)

BK2 is based on a system of subsidies for the initial installments of a loan. I will illustrate its operation with an example. The model participants in the BK2 program are couple Ania and Tomek, who have one child – daughter Antonina. They are buying a house for 750 000 PLN. This price includes 150 000 PLN of their own contribution (20%) and 600 000 PLN from a mortgage loan, which will be used to purchase the property. The ATA family goes to the bank and learns that they can take a loan with a variable interest rate of 8%. Why exactly this value? The bank representative explains that it is the sum of the current 3-month rate WIBOR3M, which is 6%, and the bank’s margin set at 2%. At this point, the BK2 program comes into play and changes the rules slightly. It applies to the first 10 years of loan repayment and stipulates that the loan interest rate during this period should be fixed and can only change once – after 5 years (halfway through the subsidy period). In this case, the bank says it can offer a fixed interest rate for the first 5 years at 7%. This will be our reference point for further calculations. Now, how to calculate the installment amount? Assuming that the ATA family takes a loan for 30 years (even though it would be better to take it for 20 or even shorter, it would significantly affect the installment amount, which the ATA family cannot afford). To calculate the amount of the first installment, we take the total loan amount (600 000 PLN) and divide it by 360 (the number of months, i.e., installments, over 30 years). This gives us 1 666.67 PLN, and this is the principal part of the installment, i.e., the money that goes towards reducing the remaining capital to be repaid to the bank. It is important to note that this part is fixed. Now let’s calculate the amount of the interest part of the installment. We take the total loan amount (600 000 PLN) and multiply it by the interest rate of 7%, which gives us 42 000 PLN. Wait… WHAT?! Relax, we multiplied by the annual interest rate, so to calculate the monthly installment, we need to divide this value by 12 months, which gives us 3 500 PLN. From this, we deduce that the first installment without BK2 subsidies would be 5 166.67 PLN. And how to calculate the amount of subsidies? It is done similarly to calculating the interest part of the installment, but the multiplier is the fixed interest rate offered by the bank (7%) minus 2% (these are the percentages that appear in the program name). So, subsidies for the presented case would be 600 000 PLN times 5% (7%-2%) divided by 12 months, resulting in 2 500 PLN. This is exactly the amount by which the first installment calculated for the ATA family will be reduced. Therefore, the first installment with BK2 subsidies will be 2 666.67 PLN. Quite a difference, isn’t it? Each subsequent installment, out of 120 covered by the program, will be calculated similarly, with the difference that the remaining capital to be repaid will decrease because with each installment payment, the principal part of the installment (in this example, the amount of 1 666.67 PLN) is deducted. As you can see, the installments will continue to decrease because while the principal part is fixed, the interest part will decrease proportionally to the decreasing remaining capital to be repaid, from which it is calculated. To save everyone from calculations, I can say that the 60th installment (the last installment in the first 5 years) will be 2 502.78 PLN, and if it is assumed that the bank will offer the same conditions after 5 years, you can calculate that the last (120th) installment covered by subsidies will be 2 336.11 PLN.

What’s next

After 120 months (10 years), the period covered by subsidies from the BK2 program comes to an end. What does this mean for the ATA family? Remember that the loan was taken for 30 years, so there are still 20 years left to repay, assuming the loan is not overpaid. Proportionally, the same amount of capital remains to be repaid. If a loan of 600 000 PLN was taken, one-third has been repaid, leaving 400 000 PLN remaining. The loan transitions to a variable interest rate mode with fixed installment amounts (unless other conditions are negotiated with the bank), calculated based on WIBOR3M + the bank’s margin. Let’s assume this is a total of 8%, as agreed earlier. How will the 121st installment look like? Unfortunately, it’s not as simple to calculate on paper, as using the PMT function in a spreadsheet such as Microsoft Excel, Apple Numbers, or LibreOffice Calc is necessary. To save everyone the trouble, I’ll tell you that I calculated it, and the 121st (and each subsequent until the loan is closed) installment will be 3 345.76 PLN. It’s worth noting that this is almost 1 000 PLN more than the last installment covered by subsidies. However, without these subsidies, firstly, reaching this stage would be much more costly (go back and see the difference in installment amounts with and without subsidies), and secondly, with a normal loan, we wouldn’t have repaid as much capital in 10 years, as we would likely opt for variable interest and fixed installments, meaning we wouldn’t be paying much capital at the beginning, and the lion’s share of those initial installments would be interest.

As part of my chronicler’s duty, I have also calculated the total cost of the loan for both scenarios (with subsidies and without them):

• Without BK2 subsidies = 1 503 564.62 PLN
• With BK2 subsidies = 1 253 147.95 PLN

As you can see, the subsidies for this case amount to 250 416.67 PLN.

At the end of these calculations, I would like to emphasize that the ATA family (and its situation), despite the similarity in names to my own family, is purely a fictional creation prepared solely for the purposes of this thought experiment.

Is it worth it

Conclusions about whether this program is worthwhile and whether such programs should exist at all (BK2 has many opponents who dislike this form of state social assistance) are left to each individual’s decision, and I have no intention of persuading anyone here. Above, I presented a handful of dry data, which, in my opinion, objectively presents the matter and provides a reasonable basis for everyone to form their own opinion on the matter. I benefited from the program because I believe it’s worthwhile, and it’s a tremendous opportunity for me to improve living conditions.

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