In the family of mortgage loans, the mortgage loan occupies a special place, while remaining close to traditional amortizable credit. As the name suggests, mortgage credit must relate to real estate owned by the borrower, whether it is property acquired through the loan in question or another property. But it can also serve other purposes than a real estate purchase. Explanations.
What is a mortgage?
To be able to borrow, a subscriber needs to back up his mortgage with solid guarantees. Among these, there is the mortgage solution: a property is pledged (one that is acquired through credit or another property of which the borrower is already the owner), so that in case problem of repayment, the lending institution can seize it and put it up for auction in order to settle the loan.
The mortgage is simply a loan granted in exchange for this mortgage. This mortgage loan may relate to one or more immovable property, whether it be the property acquired or the property which constitutes the subscriber’s property heritage.
This mortgage is granted regardless of the type of property sought: in new or old, to serve as primary or secondary residence, for a rental investment, etc.
How does mortgage credit work?
The mortgage loan is for everyone, individual or professional borrower, as long as you own at least one property. Then, its operating methods are similar to those of a conventional loan: the loan establishment establishes an amount, a duration and an amortization schedule.
A mortgage loan can be at fixed or variable rate, flexible, prepaid, long or short term. The amount granted is proportional to the net value of the mortgaged property (itself determined by an expert).
What happens if you have taken out a mortgage and want to sell the mortgaged property? In this case, you can repay the loan in advance with the proceeds of the sale, or mortgage another property by substitution.
When the mortgage is paid off in full, all you have to do is end the mortgage.
The peculiarities of the mortgage
Generally, the term of a mortgage loan is longer than a conventional loan, 20 to 30 years on average. In return, the borrower must have paid his last monthly payment before reaching the age of 90.
Note that if the borrower invests in old real estate, he can choose to proceed with the registration in privilege of lender of money (IPPD) rather than confining himself to the simple mortgage. This solution has the advantage of being cheaper, the subscriber being exempt from property advertising tax.
Also, be aware that the mortgage is not only backed by a real estate acquisition project. By definition, a mortgage loan is a loan secured by real estate; in fact, a homeowner can quite borrow a sum of money from the bank for anything other than a property purchase, as long as he can link his loan to an existing property. Thus, the mortgage loan can be a consumer loan, a vehicle loan, a personal or work loan, or even be used for a credit repurchase transaction.
What are the advantages of this type of credit?
Mortgage credit offers many advantages over a traditional loan. Here are which:
- The sums that can be borrowed are often higher than normal, which makes it possible to invest in a larger or better placed property (practical for a rental investment, for example);
- The repayment period is generally longer, covering 20 or 30 years;
- The mortgage loan is accessible to anyone who already owns real estate, private or professional;
- Due to its guarantee mechanism, this type of credit gives the opportunity to maintain a solid balance for its finances.
To these positive points, we must add the security of the mortgage. If you wish to obtain such a loan, the loan establishment will first constitute a file which will mix your borrowing capacity, your repayment capacity, and the net value of the property put in mortgage. The loan will only be validated if all the elements are safe and solid. So the mortgage loan is certainly the most secure type of mortgage today.