Mortgage loan
When a mortgage loan is a secured by a mortgage on one (or more ) real estate loans.
As liens in this case are now widely registered land charges for use (more than 90 percent of all new loans granted ). Restricted to a small extent certificated land charges or mortgages in practice still apply, even though the root word suggests something else.
Mortgage loans are an important building block of any private real estate financing. They are used on a regular basis to finance the construction, acquisition or modernization of a property. Suitable lender for a mortgage loan
- All credit institutions of the EU,
- All building societies and
- All life insurance companies
In question. Borrower can be both natural and legal persons. A limitation on the type of property does not exist.
Benefits of mortgage loans
Unlike unsecured loans such as personal loans, the lender is at a mortgage loan in the event of a default property as additional security. If the borrower is no longer fulfilling its obligations under the Loan Agreement, the Lender may (for example, through foreclosure or receivership ) redeem the property by collecting the mortgage loan.
This increased security for the lender usually leads to more favorable loan terms than unsecured loans.
Disadvantages of Mortgage
By registering a mortgage on a property and the subsequent sale of the property is slightly more difficult. Since in practice a takeover of the mortgage loan by the new owner is impracticable, a replacement of the mortgage loan must be carried out in parallel with the sale. This increases the complexity of the sale. In addition, Land Registry and, if necessary, notary costs.
Mortgage models
Fixed-Rate Mortgage: Loan with a fixed term and a fixed interest rate (usually 1-10 years). During this period, a cancellation of the mortgage loan is usually possible only against compensation. Since you do not change the mortgage interest on the fixed-rate mortgage over the term of the mortgage, there are no risks in this type of mortgage market interest rate movements. Fixed-rate mortgages are usually assessed as low risk.
Adjustable-Rate Mortgage: Variable mortgage loans have a variable interest rate that is determined by the general capital market development. As the market interest rates for variable mortgages usually lower than those for fixed-rate mortgages, variable mortgage for new mortgages is usually cheaper. However, the borrower bears the risk of a rate hike, as reflected rising interest rates directly in higher interest charges. Variable mortgages are particularly during periods of rising or volatile interest rates as risky.
Libor mortgage: Libor mortgages are characterized by variable interest rates and a fixed term (usually 6 months) from. Generally, the Libor mortgage is a Fixhypothek short term. This loan type has an inherent risk that lies between fixed and variable mortgage. It can be benefited from declining mortgage interest rates. To minimize the risk of rising interest rates somewhat, additional products for interest rate hedging can be applied.
In addition to the standard models mortgage fixed-rate mortgage, variable rate mortgage and Libor mortgage still exist numerous other mortgage options.