What is a Mortgage Loan?admin
What is a mortgage, what is it, how to take into account all the risks, who owns the property bought in a mortgage, and how not to overpay interest? We tell you what to do before you take out a mortgage loan and after you have already decided on it.
A mortgage is a guarantee of real estate. That is, a mortgage loan means that you take money from the bank at a percentage (credit), and the guarantee that you will return this money becomes a guarantee of your real estate: home, apartment, land.
A mortgage is usually perceived as a loan to purchase a home. In this case, the apartment (house) pledged with money received from the bank is pledged. But this is only one, albeit the most common, type of mortgage.
You can also mortgage the property that you already own and take money from the bank for a new apartment or house. Moreover, you can take a mortgage loan not only for the purchase of housing, but also for its repair, construction and other purposes without specifying them.
A mortgage loan is issued either by one agreement or by two: a loan agreement and a mortgage agreement, that is, on the transfer of real estate as collateral to a bank.
There are preferential mortgage programs with state support. For example, for families with children and for home buyers in the Far East . More information about these programs can be found on the website of the state corporation DOM.RF .
Real estate is objects that are firmly connected with the land, which cannot be moved in space without harming them. According to the law, aircraft and ships, as well as space objects are also real estate (although they can be moved). So if you have a spaceship in your possession, theoretically you can put it in a mortgage.
What do I need to find out before taking a mortgage?
Usually, a large amount is taken for a mortgage for many years, so this is serious and for a long time. Therefore, before taking it, you need to answer yourself the following questions:
1. How much money do I have for the down payment and how much do I need to take on credit?
As a rule, in mortgage contracts there is a condition under which you must pay a part of the cost yourself – the so-called down payment. For example, you must pay 30% of the cost of the apartment at your own expense, and 70% of the bank gives you a loan.
2. What part of my income am I ready to give to the bank on a monthly basis to repay the loan and during what period can I do it?
Estimate your income and future expenses.
If your loan payments will exceed ½ of your annual income, then there is a risk of not being able to repay the loan.
Take your time, be picky and compare offers from different banks, carefully study the terms of the contract. Make sure that you understand each point.
The general conditions for all clients, for example, the rights and obligations of the borrower and the lender, are still set out in plain text in the contract.
Types of Mortgage Interest Rates
If the size of payments changes, the bank must send you an updated schedule (the delivery method is specified in your contract). Until you get it, pay according to the old schedule. The bank cannot retroactively change the payment amount.
The full cost of the loan (CPM) in percent per annum and in local currency (or other currency in which you take a loan) is indicated on the first page of the contract in the upper right corner. It takes into account all your expenses on the loan: the main debt and interest on the loan, as well as other contributions that you will have to pay the bank under the contract.
3. How will I repay the loan?
Mortgage loan payments consist of two parts: payment of a part of the loan amount (principal) and interest on the loan.
Do not forget about the rest of the expenses: you will have to pay the state fee for the state registration of the mortgage and pay the mortgaged property insurance.
The Bank cannot charge you for the performance of its duties in obtaining and servicing a loan, as well as for services that the Bank provides to you in its own interests. For example, for considering a loan application.
The mortgage is repaid by differential or annuity payments. Do not rush to get scared – we will explain what these words mean.
Differentiated payments – you return a fixed part of the main debt monthly plus pay interest for the outstanding part of the debt. Each month, the payment is reduced, and for the entire loan term, you spend less on interest than with annuity payments. But first, loan payments will be significantly larger than payments at the end of the term.
Annuity payments – you pay equal amounts every month. You pay off the main debt in stages: its share in the annuity payment increases every month, and the interest for the next month of using the loan, respectively, decreases. With a constant loan payment amount it is more convenient to plan your own budget.