In the legal field, there are several rights to which individuals can have access, this is the case of real security rights which have the advantage of giving the owner a real power over something that is still alien. In these real rights we find the mortgage , which guarantees the fulfillment of an obligation but also gives rights to the goods . In simpler words, the mortgage is a type of loan that a bank makes to an individual or a company in which the guarantee turns out to be the value of the property .
A mortgage is a real right that has the ability to tax one good property which is obtained to ensure that the obligation acquired, usually for a loan to achieve achieve a certain product.
- Characteristics of a mortgage
- Mortgage types
- What is it for
- How does it work
- 100% mortgages
- How it differs from a home loan
- Can you sell a mortgaged house?
Characteristics of a mortgage
Among its main characteristics we find the following:
- They are a way of representing the financial commitments that are acquired.
- They have high interests and also have a long duration .
- It can only be established by the person who has the power to sell a product or good.
- It can only be acquired when it comes to real estate , in other words, on lots, apartments or houses.
- It must be constituted by means of a public deed .
- It can be established by people who have legal capacity.
- It can also be established by natural individuals who make money loans as a guarantee that the money will be paid off.
- When the main contract ends , so does the mortgage .
Mortgages depend on the interest rate and based on this they can be classified into the following types.
- Fixed mortgage: in this type of mortgage, the interest does not vary while the loan is in force. This makes it more advantageous as the client will not have to undergo increases regardless of whether the market interest increases or decreases.
- Variable mortgage : in this case, can present the variation of the interest at some point. In them, an initial term is established in which the interest will remain fixed and then, at the end of the period, the variable interest begins to be applied increasing the amounts of the installments.
- Mixed mortgage : in it, the interests can remain fixed during an initial period, which must be greater than one year and after this period of time it can vary .
What is it for
The mortgage is primarily a banking product that serves to acquire one financing in order to buy , so generally a property , with the obligation of the person acquiring the mortgage to repay the entire amount of money that has been borrowed, in addition to the interest generated by the loan.
The requirements to acquire a mortgage vary greatly depending on the bank that issues the money for the purchase. Some of the more common requirements include the following:
- That the client has sufficient economic capacity to be able to cancel the installments.
- Economic savings that cover at least 30% of the amount of the home.
- The debtor must have a stable job .
- The debtor must also have an excellent credit history , without blemishes or debts.
- Some institutions require that the debtor be no more than 75 years old .
- Documents that include identity card , labor certificates or accountants depending on the type of activity, bank movements , income statement , deeds of other properties if they exist, extra income .
How does it work
After applying for a mortgage, the bank customer must start paying the monthly installments that have been established in the contract. The amount requested is known by the name of capital and each month, during the established time, a payment must be made per month which will be destined to the payment of the capital , of this amount of money, a part will be destined to pay the interest generated by the loan.
The part of the money that is paid and that is destined to the capital causes the amount owed to be reduced on the loan and forms what will later be the equity value. The economic part earmarked for interest does not reduce the total balance nor is it part of the patrimony.
The conditions to be able to apply for a mortgage will depend to a great extent on the requirements of the same and can vary between the different banking entities that exist since each of them has its own guidelines for the necessary conditions prior to the approval of the mortgage.
In some banks, the client does not pay expenses for the mortgages, however, in most, the clients must make an economic investment on the expenses that occur in the execution of the public deed. Among these expenses we can find the following:
- Notary fees (paid by the bank).
- Registration fees (paid by the bank).
- Fees of the lawyer or agency that performs the registration in the Property Registry (paid by the bank).
- Taxes on legal acts.
- Cost of the home appraisal (paid by the user).
Although it is not very common, some banks can grant customers 100% mortgages. This type of mortgage is a loan that has the capacity to cover the total value of the sale of the home to be purchased. They are loans that have a higher capital , the terms are much longer and the monthly payments are much more expensive.
Among the main advantages of mortgages we mention the following:
- Currently, banks offer quite low interest rates for the purchase of a house, which increases the possibility of acquiring the loan.
- The amounts that financial institutions provide are much higher than other types of loans.
- They can also be used to renovate or repair housing,
- Being long-term , the client has a better purchasing power since the installments can be accommodated within their budget.
- The user has the possibility of being able to live in his home while paying off his mortgage.
Mortgages also have a series of disadvantages, which can result in serious problems, among them we can mention:
- If financial stability is lost , which to some extent is unpredictable, the client may lose ownership.
- The arrears that occur in the monthly payments cause the interests to increase and these are quite high.
- The insurance that covers them in case of fire or earthquake only covers a part of the mortgage.
- It is a debt that must be well analyzed since it will last between 20 and 30 years .
How it differs from a home loan
The main difference is that a mortgage loan is a type of contract by means of which an entity can lend a certain sum of money to an individual or a company so that it can acquire a property in exchange for the payment of a series of interests in a deadline. The mortgage is a right royal assurance which ensures that the loan will be paid.
Can you sell a mortgaged house?
When a home is mortgaged, it is possible to make a sale of the property, but for this, a process known as mortgage transfer must be followed , in which the person who buys the home acquires all the rights and responsibilities. Of the debt. Then, the person who buys the mortgaged house will be the main figure of the loan , he will be the owner of the house and also the debtor .
The main importance of the mortgage lies in the possibility that it gives individuals to acquire real estate , in this case a decent home to live in. In addition, it is one of the means by which homeowners manage to have the ability to make repairs or additions to their homes.
An example of a mortgage can be seen in a client who wishes to acquire his new home. After presenting all the necessary documents, the bank approves the loan and the client can then move to live in his new home while making the mortgage payment on a monthly basis.