Taking a mortgage for the purchase of a real estate

By June 6, 2017Articles
You have saved some money but found that it is insufficient to buy a house or an apartment. So you have to turn to a financial institution that proposes you a mortgage. It assumes that the property purchased on credit is mortgaged. Property of the creditor, it then constitutes a guarantee that allows the household to subscribe to other credits, generally consumption, which stimulates the economy.


Mortgage is common everywhere

Mortgage is simply a bank loan secured by a mortgage, which can be taken from the property to be acquired or from property already acquired.

The mortgage is usually taken first, which implies the resumption and refinancing of any existing credit on the existing property, an interesting solution since it can lead to a rescheduling of this loan over a longer period of time, hence to lower the monthly installments, or to reduce the rate according to the case.

The mortgage can be a conventional acquisition loan or a cash loan, whatever its purpose. The destination of the funds will be requested by the bank and justified by the borrower.

It is always a notarized loan, like the loans acquired, the notary remitting the funds when signing the deed, either to the borrower directly or to the beneficiary of the loan at the convenience of the parties.

This type of loan generates repayments that can be depreciable or in fine, variable rate or fixed rate as in any traditional loan.

Take the Debt ratio and the Lot size into consideration

The Debt ratio is between the borrower’s income and its expenses, systematically taken into account and oscillating between 30 and 40 % depending on the institution.

The Lot size is the percentage of the value of the property covered by the guarantee and which determines the maximum amount of the loan granted. It varies from 50% to 100% of this value, depending on the institutions requested.

You will need to offer something as collateral

Usually, you offered a property as a collateral preferably dwelling, but may also be used for office or business purposes. As for the legal status of the property, ownership by own name remains preferable, property in joint ownership, dismembered or in SCI limiting the choice of bank partners

Processing of your mortgage and costs involved

It can take from 10 to 60 days depending on the institution, on receipt by the latter of a complete file, 30 days on average to be added for the realization of the loan.

On the other hand, intermediation fees, according to your file, may amount to 3 to 6 percent(on estimate after an initial study of the project) of the amount of funding obtained.

Usually financed by the bank, they are only due in the event of a good end (obtaining a loan accepted by you) and paid when releasing the funds

Some institutions compel you to take an insurance of the loan but for others, it is not compulsory.

It may happen that the property covered is sold

In the event of the sale of the property covered by the guarantee: the credit is sold off by the sale of the property, the lender being reimbursed at the time of the sale, the mortgage being waived at that time.

It may also be transferred to another property at the discretion of the bank, with the credit continuing in its effects in this case.

The offer can be accessed

Traditionally, for a first purchase, 10 percent of the selling price of the property is requested in contribution. For an apartment of 150,000 Euros, this gives therefore 15,000 Euros contribution, or a possible loan of 135,000 Euros.

At the sale price, there are certain additional costs (see details here, for example):

  • Stamp duty: 1,750 Euros
  • Legal fees: approximately 2,000 Euros
  • Registration fees: around 500 Euros
  • Or 4,250 Euros in miscellaneous expenses added to the contribution.

Rates do not vary widely

Concretely, the rates are at their lowest since the World War II. In Ireland, the margin of banks is substantial; So they will not be forced to increase their rates significantly if the global rate market goes up. Moreover, in 10 years, for example, if the situation is better, competition will be there again and rates will be more competitive.

Difficulties faced in reimbursement

The buyer is described as ‘willing, willing and capable’ if he is willing and able to exchange contracts for the purchase of a property. This means that he must be legally able to conclude the contract and must be able to satisfy the terms of the contract, including the financial means necessary for the sale to be executed.

Most banks offer a bridge loan to buyers who are experiencing liquidity problems when they expect to receive the money from a previous sale. The types, terms and conditions of this type of loan, as well as applicable interest, vary. Either way, the interest rate applied to this type of short-term loan is usually higher than for a long-term loan, such as a mortgage.

If the buyer has difficulty paying off his mortgage and is late in making payments, he may apply to the credit institution for an arrangement to review the mortgage contract in order to reduce the monthly installments and spread them over a longer period. However, if payment delays persist, an injunction by the courts may result in the seizure of the property purchased.

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Source : http://www.citizensinformation.ie/en/housing/owning_a_home/help_with_buying_a_home/paying_for_a_home.html

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