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Table of contents :
What is a mortgage? Get a mortgage - what does it mean? The difference between a mortgage and a land fee In the event of bankruptcy, there is a risk of foreclosure These are the costs you should expect with a mortgage loan What is the difference between a mortgage loan and a home loan? Cancellation of a Mortgage Loan: Taking a Mortgage Loan: What to Consider, Mortgage Advantages and
disadvantages ,, Major characteristics of mortgage
What is the meaning of mortgage loan?
The term mortgage loan is used in relation to real estate financing. For example, if you obtain financing to build your home, it could be in the form of a mortgage or a traditional annual loan. The latter is the most popular form of real estate financing nowadays. So obtaining a mortgage means:
The lender, i.e. the bank, finances the purchase of a property for you as the borrower. The financial institution provides you with a certain amount as a mortgage. In return, the lender gives the right to sell the property if you are no longer able to pay off the mortgage loan.
From a legal point of view, a mortgage loan is part of the real estate lien and serves the lender as a guarantee against the risk of a loan default. In the event of the borrower's bankruptcy, the mortgage loan gives the lender the right to seize the land or property on it in order to obtain his money.
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To find out the terms of the mortgage loan and how to obtain it from here.
The difference between a mortgage and a mortgage.
Get a mortgage - what does that mean?
When the term "take out a mortgage" is used, it usually refers to financing a property. Taking out a mortgage can also mean that you, as the homeowner, want to borrow money from your home to finance something - for example, making a renovation on your property. To be correct, in either case it must already be said that a mortgage loan is being used par excellence. Since this is a right related to the purchase of a property, the mortgage is always entered into the Land Registry. A notary takes care of that. It passes the information required to enter the responsible land registry. When registering a mortgage, the Land Registry takes a note
Creditor, claim amount, interest rate and all additional services at their value.
In addition, the creditor's land registry issues a deed, a letter of pledge. This is why experts also refer to this type of mortgage as a mortgage letter. A reverse mortgage is a book mortgage, which is only recorded in the Land Registry without a letter.
Mortgage letter versus mortgage
The rule when granting a mortgage is a mortgage. Using this variable, a creditor can waive its claims simply by handing in the mortgage letter - that is, without re-entry into the land registry - and a written declaration of assignment. This is necessary, among other things, if you as a borrower choose cheaper follow-up financing from another bank after the fixed interest period expires. A mortgage saves time for everyone involved and is cheaper than a mortgage assignment, which must be entered into the land registry for a fee.
The foreclosure is an outdated mortgage model
Contrary to popular belief, a mortgage only serves as collateral for the loan in a few cases. Often in place today - as in a traditional mortgage with annuity - the mortgage. This is because this is easier to handle with credit institutions. Industry experts assume that only 20% of all real estate liens are mortgaged. The remaining real estate is attached by way of land fees.
The difference between a mortgage and a land fee
Land fees, like a mortgage, are a concession, but there are the following differences:
While a mortgage lien is tied to a specific claim, a mortgage is not. A mortgage par excellence decreases as the loan is gradually repaid - as the loan debt decreases. For example, if you have already paid off half of the loan, the linked mortgage is only half of the loan. Land fees vary: If you pay off the loan, your loan debt will of course also decrease, but the land fee remains full. Once you pay off the last mortgage loan installment and settle the debt, the mortgage expires. This means that the lender is no longer eligible to claim, i.e. your property. On the one hand, the land fee always remains in full, even if you have already paid off the loan. In both cases, the entry remains in the land registry and must be deleted by the notary.
Mortgage advantages and
disadvantages
First, the advantages of mortgage:
- First, you are fully protected in the event of high interest rates.
- Second, it facilitates fixed rates and payments.
- Third, the loan options of all lenders are compared.
Second, the mortgage disadvantages.
In the event of low interest rates, you cannot benefit without refinancing. This is unlike an adjustable mortgage, as there is no lower introductory rate.
Advantages of land versus mortgage
Land fees are the least time-consuming and costly alternative to credit institutions in everyday life, which is why they are gradually replacing the traditional mortgage as a mortgage. So financing a mortgage with a mortgage is no longer appropriate these days. However, since the term mortgage is more common, many today use it as a synonym for land fees.
The Land Fee Advantage For The Bank: It is especially beneficial to the lender that the land fees lead to foreclosures more quickly in the case of debtor bankruptcy than for a mortgage. If the borrower defaults on small monthly payments, the bank can initiate a foreclosure auction without making a court claim or reservation request. The first advantage of land fees for you: You can leave the land fees in place after full payment and use them for other purposes, for example as security for a new loan , For example to update. With this alternative, you will not incur any new costs to enter the land registry. The second advantage of land fees for you: even with rescheduling, you do not have to make a deletion or a new entry in the land registry, which may lead to a fee of 1000 euros and more. An assignment letter from one lender to the next is sufficient.
In the event of bankruptcy, there is a risk of foreclosure
If you default on the mortgage loan, the lender has the right to order a mortgage sale or foreclosure to settle the remaining claims with the proceeds. This right gives the lender a mortgage lien. Another way for a creditor to obtain his money is through management. The rental income from the property, after deducting the costs of managing the building, is then used to settle claims.
The order of precedence in the foreclosure
When financing a property with a mortgage loan, in the case of selling a mortgage, a distinction is made between a first-degree mortgage and a second-degree mortgage, as well as a 1A or 1B mortgage. These terms refer to the arrangement, the so-called rank, in which a property lien such as a mortgage is found in the third section of the Land Registry. In fact, the property can be mortgaged by multiple mortgage loans.
Arranging land registry entries becomes important if, as the borrower, you can no longer pay off the loan. Because then the principle applies: first come, first served. If the property is seized or sold in an emergency situation, the creditor will be the first to receive the money, which is entered in the land registry first. The entry primarily provides the most security to the funder. Therefore financial institutions are prepared to offer particularly favorable terms for first-class mortgage loans. The lower the lender's ranking with a mortgage, the higher the cost of the loan.
The value of the mortgage lending determines the arrangement of the mortgage
Whether it is a first or second degree mortgage depends on the lending value of the property used as collateral. The value of the mortgage lending is the value of the property that the banks would acquire if the property were sold. Because lenders like to play it safe, they usually do not fully finance the property, but only up to what is called a mortgage lending value. Each lender determines the amount according to its own criteria. The lending limit is usually around 80% of the purchase price. This means that if you want to buy a property worth 300,000 euros, the bank will only grant you a mortgage of 240,000 euros. You must bring the remaining 20%, which is € 60,000, as equity. For some years now, however, 100% financing or also mortgage lending without equity is possible.
To classify a mortgage as a 1A or 1B mortgage, the lending limits now apply. Every believer decides that for himself. Some draw the lending limit at 80% of the lending value, while others draw it at 45%.
If the loan amount is within the lending limit, then it is a first-degree mortgage. If the loan is between the lending limit and the lending value, then it is called a secondary mortgage.
These are the costs you should expect with a mortgage loan
There are fees for registering a foreclosure in the Land Registry. The amount of the fee depends on the amount of the loan to be insured. Fees can range from several hundreds to over a thousand euros. However, it is difficult to say in advance what the notary costs for a mortgage. As evidence, 1.5% of the loan amount is used. With 100,000 €, this would be 1,500 €, with a 300,000 € loan amount actually 4,500 €. Additionally, the mortgage interest can also be charged for the mortgage loan. These are intended to cover the costs incurred in the event of foreclosures. The amount of the land fee is between 5% - 10% of the debt amount and is calculated annually.
What is the difference between a mortgage loan and a home loan?
Unlike a construction loan, with a mortgage loan, you can freely dispose of the loan amount. You determine what happens to the money. It differs with a typical construction loan, for example to build a home: Here the bank pays after you submit the invoices for the individual construction stages. This way, the bank guarantees that the loan only pays for the home's construction costs.
A mortgage loan is synonymous with a classic home loan
What financial advisors refer to as a mortgage loan shortens the term of the mortgage loan. The interest on that is called mortgage interest. The amount depends not only on general influencing factors such as inflation but also on your personal creditworthiness as a borrower.
Mortgage loan as a fixed rate mortgage
Home finance via mortgage loans, where mortgages are offered, is now outdated. This is why a mortgage loan is now widely used as a synonym for a home loan. The most popular form of mortgage loan currently is a construction loan in the form of an annual loan secured by a land fee. With the annual loan, the mortgage interest is fixed for 5, 10 or 15 years. In technical terms, this is also known as a fixed rate mortgage.
Beware of adjustable mortgage loans
Instead of fixing mortgage rates, you can choose a variable rate mortgage. The interest that you will have to pay is adjusted regularly according to the ECB's main rate. The advantage: these loans are cheaper than fixed rate loans. However, for real estate financiers, the variable interest rate also carries enormous risks: If the interest rate rises, it can quickly exceed your budget. In the current stage of low interest rates, experts advise choosing variable rate loans only in small amounts. In times of high interest rates, a variable loan can be useful to wait for mortgage rates to drop.
When can a mortgage loan be canceled?
You can cancel loans with variable interest at any time with 3 months' notice. The same is true for fixed-rate loans: These loans can only be terminated under certain conditions. The legislation allows you to provide notice if you have to sell the property or if you need a higher loan amount. However, the bank can then claim some kind of fine: an early repayment penalty. The amount of this compensation depends on the remaining term of the loan, the agreed interest rate, and the current interest rate. If you choose a flat rate of interest for 10 years or more, you have the right to terminate the contract after 10 years. You can cancel with 6 months' notice without having to pay a prepayment penalty.
Major characteristics of mortgage
First, mortgage is difficult to trade.
Second, the mortgage has long repayment terms that make it difficult for the lender to reinvest the monthly payments at an affordable rate.
What is meant by canceling a mortgage or land rent?
Deleting a mortgage is not considered to be the termination of a mortgage loan. When you, as the borrower, pay off your mortgage loan, the creditor's right to foreclosure expires automatically. However, it remains registered with the Land Registry - unless you, the owner of the property, delete it.
To remove land fees, you need a cancellation permit, which you can obtain from your bank. You must have this cancellation request certified by a notary. The notary transfers the deletion to the Land Registry. If all requirements are met, then permission to delete comes into force.
It is sometimes advisable to omit land fees when planning to sell a property. Many buyers want an unencumbered home that has a "clean" record in the land registry.
Taking out a mortgage: What to consider
Bring in enough equity: 20-30% of the loan amount is recommended. Construction money is currently cheaper than ever: Choose a mortgage with a fixed interest rate for the longest possible period. Choose the highest repayment possible so that you can get rid of debt faster. But don't overdo it: you must be able to handle pricing well. They must not represent more than 40% of net income. To obtain a fixed rate mortgage, agree on a special repayment option, say, 5% per annum. This gives you flexibility: you may or may not take the choice.
Mortgage Comparison: Find the Best Mortgage Rates
As mentioned earlier, the classic mortgage loan is being phased out with fees on the property and instead the mortgage is now used as a synonym for a construction loan which is secured with land fees. So if you take out a mortgage today, it will most likely be a classic home loan. You can find current building mortgage interest rates in our construction money comparison. On the other hand, if you really want to get a mortgage lien, we recommend that you speak to a bank advisor
Your direct and get advice.
What are the 3 types of mortgages?
The third types are; Home mortgage, land mortgage, car mortgage.
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