Why mortgage loans are so popular with borrowers and how they are treated by lenders themselves:
- A mortgage loan often becomes a “lifeline” for a client, as almost any liquid real estate owner can obtain it. In addition, it takes a very short time to process a loan, and additional information (credit history and income statement) is usually not required of the client.
- The bank has a favorable loan against the pledge and is aware of its benefits before approving the loan application. Because: first, the valuation value of the collateral itself is specifically lowered compared to market prices; secondly, the loan amount will not exceed 70% of the real estate valuation price. It turns out that if the mortgage loan is not repaid, the bank will be able to sell the real estate very quickly (because the price is lower than the market price) and cover the entire amount of the outstanding debt while making a profit.
Usually a pledge is any real estate (house, apartment, chalet or garage) or car, but rarely does the borrower know that the pledge can also be precious metals, securities, electronics, home appliances etc. Banks are not interested in such pledges, they only consider real estate. property. But for pawnshops, a gold bracelet or a good TV – a reason to give you money for your interest.
By right of use, the pledge property may be divided into the following categories :
- If the pledge is real estate, it is used by the borrower.
- The lien in the form of precious metals, ornaments and appliances shall remain in the hands of the creditor throughout the repayment period. In the event of non-payment, the creditor has the right to sell the proceeds received from the borrower and use his funds to make good his losses.
- A car is the only type of collateral in which there is a dual situation: for the duration of the loan, the car may remain in the lender’s place or be in the borrower’s service, but in this case the annual rate will be higher than in the first case.
When mortgaging real estate, the loan processing procedure consists of 2 steps, the mortgage itself must be notarized.How not to fall into the trap
It is up to the borrower to decide whether to take out a loan against a pledge or not. The first thing to understand is whether this money is really needed and needed. If a mortgage loan is taken out for an urgent operation without which any of your loved ones may die, it is not time and worth thinking about its benefits. If you decide to take out a mortgage loan to buy new equipment or a necessary instrument that will make you profitable in the future, then the rationale here is obvious: all the costs of the loan will pay off, but soon you will start to make a net profit.
All other situations need to be looked at “under the microscope” so that you will not be left without housing at all. When taking out a loan for any purpose, you must know in advance that not only the loan amount itself but also the interest accrued on the use of the money will have to be returned.Before you apply to a bank for a pledge loan, try to answer a few questions that will help you evaluate the rationality of your loan :
- If I become unemployed, how will the loan be repaid? What benefits can I expect from a bank in this situation? What threatens me if I fail to repay my mortgage and will it not harm my family?
- How much will a mortgage loan cost me (principal amount of the loan + interest rate + execution costs, evaluation, etc. tasks)?
- Do I really have such an urgent need that I want to meet with a pledge loan that I am prepared to pay not only the annual rate but also some restrictions?
- For how long can I collect the full amount of the mortgage credit, deferring each paycheck, in a way that does not harm my family in any way?
- How can buying a loan money help improve the quality of life for my family? How much will the monthly handling of this case cost and how often will it be related to the case?
- What are the payout limits for me and my family throughout the repayment period of the mortgage loan to repay it on time and in full?
- Without what do I have to do, to what extent will I limit my family’s budget to make enough monthly payments?
To answer the questions on this list, you will need a clean sheet, a calculator and a pen. Once the key numbers have been calculated, you can actually answer any of these questions. Unless the scene is overjoyed, then reality is likely to have cooled you down a bit and helped you get out of the illusion world.
If, looking at the numbers you have acquired, you decide to take out a mortgage loan, try to give the bank as much as possible. If you have an unexpected excess amount of money – repay at least a small amount of debt. By following this condition at all times, you will be able to avoid many negative moments in the mortgage loan repayment process. As a result, you will save on the annual interest rate, as the loan will be repaid early.
Warning for borrowers
It will be much easier to fall into the collateral credit trap if you know what the outcome of this or that will be. Here are some common mistakes that borrowers make and later stop dealing with credit repayments:
- Mortgage loan in foreign currency. This step is not recommended if the repayment period is several years or even decades, as in the case of a mortgage.
- Always read what you sign. Quite often, unscrupulous creditors give the borrower a contract of sale instead of a pledge. Then it turns out that the client buys his own apartment. This is called ‘reverse leasing’.
- When you receive large sums of money in exchange for a mortgage loan, be prepared for sufficient additional expenses, such as insurance. In the case of car loans you will only be able to get through CASCO, but in the case of a real estate mortgage you will have to pay for life, health, property and property insurance. In addition, insurance is an annual cost, often resulting in high costs.
In short, a collateralized loan is a transaction that needs to be considered and recalculated several times before the loan agreement is signed. If the need for money is not so urgent and you are unsure of your own efforts, you better wait before making such a commitment.