Have you been thinking about buying a new home for a long time? Plans on realizing these ideas, but have never been put into action? To buy another home, mortgage loans can help you. To convince yourself that the idea fits your situation and desires, read the article and find out what real estate loan is, why it’s often the most advantageous option when buying a new home, and what to keep in mind!
Loans against real estate collateral are issued on various occasions, the most common of which is to:
- purchase real estate;
- extinguish various utility debts;
- to carry out economic activities;
- establish or develop a business;
- to cover construction costs, etc.
In the following article, we will look at one of the most frequently cited reasons why people choose to settle this type of credit obligation with their banking sector lenders – a new home.
Mortgage loan – what is it?
Maybe you’ve heard a term like mortgage? If so, you can rest assured that this is a sign of equality as a mortgage loan because it is one and the same. It is a:
- a long-term loan, the repayment of which may be contracted for up to 30 years, during which the amount specified in the loan agreement must be repaid;
- a relatively low interest rate loan, which means that you will not have to pay too much in repaying the loan;
- loan, the amount of which depends on the market value of the mortgaged real estate. In most cases, the loan amount is 50% -100% of the value of the pledged property.
Loans against real estate collateral – from antiquity to the present
Do you know that the term “mortgage” in French means “mortgage”? This is because there were only two ways to terminate a loan, either by paying off the loan in full or by foreclosing on the property.
How did it evolve?
- years. Before that period, we did not know the mortgages they are today. In the early 20th century, credit institutions provided mortgage loans, providing less than half of the total mortgage that was due in 3-5 years.
- years. When the US hit the crisis, it changed the way mortgage lending was done. Cheap, readily available and affordable mortgages have been provided since the government intervened.
Present day. The gold middle ground has now been found – allowing a longer repayment period but limiting who is allowed to take out mortgage loans.
What will be required when entering into the contract?
In case of conclusion of the agreement, the bank will require different data and different conditions, including:
- currency. The currency of the loan is an essential rule. You need to understand which currency is most advantageous and evaluate which one will help you most during your loan repayment. As a general rule, it is advisable to choose the currency in which you receive money daily into your account so that you do not lose the amount of money when converting money to a credit currency;
- interest rate. In the case of a mortgage loan, you should forget about the 100% commission discount as this is a long term loan. Choose the interest rate that will guide your loan repayment;
- guarantor. It is also referred to as credit to borrower. Why is it? Because it is this person who will answer if you do not make your payments on time.
It is the guarantor’s need to distinguish long-term loans from short-term loans. In the case of long-term credit, this is important because the amount of the loan is much higher, as is the repayment time.
What is the importance of the payment schedule?
This will not change the cost of your loan repayment. Each borrower, when concluding a long-term contract, gives the lender the choice of the type of payment they wish to use. What are they?
- Equal payment. This means that you will have to pay a constant, constant amount throughout the repayment period, which has its advantages, such as the always known monthly expenses.
- Descending payment. This means that you will pay a higher amount at the beginning of the repayment period and decrease each month. This type of drawback also has its advantages, for example that although the initial repayment is above average, it will be significantly lower in the final period.
No extra cost!
It should not be forgotten that in addition to the loan amount, you will have to spend a relatively large amount on the preparation of various documents before the conclusion of the contract, for example:
- preparation of a lump sum;
- credit assessment;
- pledge registration;
- market valuation of housing, etc.
It should be noted, however, that each lender has different rules, so the amount of money and the amount of documents may fluctuate. How to get a loan?
Receiving – fast and easy
With the advancement of modern technology, on-site appointments and paper signing are not excluded when real estate credit is required. Four steps are required:
- find the best option. Mortgage loan is a standard offer for various known long-term lenders and it is advisable to consider all options before finding a contract to find a relatively suitable one;
- contact your lender. Each lender offers to contact them either by completing an application or by calling the designated customer service number;
- get advice. When examining your application or receiving a call, the consultant will make the most suitable offer for you and your wishes and needs by speaking to you over the phone;
- Make a deal. Once you’ve got all the necessary documents, you can go to the lender to sign the contract and get the amount you want, which you can then use as you see fit.
We at Arep Mabin, a non-bank lender, remind you to borrow responsibly as you evaluate your chances of repayment!