Most of the articles on property loans are pure advertising, so it’s possible that some information escaped you somewhere. In this article, you’ll learn a lot of simple but maybe surprising things about real estate loan.
A bit of terminology
A loan secured against real estate, i.e. a mortgage, is a form of financing in which any property is the security of the claim. It may be a house, a flat, a plot of any character, and theoretically also part of the property (you can, for example, have rights to half of the plot and nothing prevents the bank from being satisfied, however, for practical reasons this is not a solution preferred by lenders ). The security is determined by debiting the mortgage, ie entering the entry in the land and mortgage register.
What can you secure with a mortgage?
The most popular mortgage is a housing loan – the bank values the property you want to buy and if this valuation coincides with the seller’s valuation, it finances your purchase. In fact, until you pay the last installment, you can not release the mortgage and the flat is burdened with a loan obligation, but as long as you pay off the loan on time, insure the flat and implement other provisions of the loan agreement, you can feel master.
A slightly more complicated procedure applies to the financing of construction, because in this case the security may be a property that does not actually exist. Technically, a plot may be a security, but it is impractical, and in some cases impossible, if both objects (such as a plot and property on it or a plot designated inside another, larger) are inseparably connected with each other.
Consolidation loans secured against real estate are promoted less frequently. In such a loan, the bank takes over your existing loan obligations, but the mortgage of the indicated real estate is determined. Of course, it should have an appropriate value in relation to the liabilities covered, while the bank determines the amount of this ratio. It is possible to consolidate mortgage loans, in which case only the beneficiary of the debit from the bank who has granted the loan, for example to purchase a flat, to a bank that consolidates liabilities changes.
Whose property can you use?
For the simple reason that most of us do not have too many properties on the property, most often the loan for the apartment is the same, and the house is just for building a house. However, this is not the only solution. You can successfully take out a loan against real estate other than the one that is the subject of the purchase.
In practice, this means that you can secure a loan for building a house. However, this is not all, because you can secure loans also with real estate for which you have no legal title. This is quite a common solution in some cases – parents can pledge their own home to buy a flat for children, but you can also set up a security for several properties – this is done when the new loan must be significantly higher than the value of a single property. Of course, in this case the credit procedures become more complicated, but from a technical and legal point of view everything is in the best order.
Real estate loans – a favorable solution
Real estate loans provide a lot of opportunities, and although they are always a burden, by choosing alternative financing options, you can find really good solutions to most investment problems for a larger amount. Much will depend, of course, on the bank’s policy, but very often the borrower must take the initiative to take full advantage of the mortgage security and, for example, the involvement of outsiders in the loan process.