Knowing how mortgage loans work is essential before resorting to this financing method. Therefore, today’s publication presents a small guide to guide the user who wishes to make this type of financing.
How mortgage loans work in three steps?
The mortgage loan is nothing more than a loan guaranteed for a particular asset. This good is usually a house, which is the one bought with the loan.
1. Market research
The first step when applying for a mortgage loan is to check the different offers in the market. The prices of a loan will depend on the conditions offered by the lender. So, who wants to ask for a mortgage loan, should check the offers of several financial operators. In particular:
– Terms and conditions for return.
– Remuneration interests (TIN).
– Interest on late payment.
– Other expenses and commissions.
The APR is equal to the sum of interest plus expenses and commissions. So it will be the best indicator of the real price of a loan.
2. Warranty establishment
The second step will be to establish the guarantee. In addition, it must be assessed, a function that usually corresponds to the borrower. The higher the guarantee, the better the mortgage credit conditions. What is this about?
Basically, the mortgage is not born until it is registered in the Land Registry. The owner of the property writes in this register that he has mortgaged it.
If the borrower stops paying their installments, the financial entity may file a foreclosure claim. In this case, the borrower will have three options:
– Pay your debt.
– Refinance the loan or renegotiate its conditions.
– Cancel the mortgage.
Otherwise, the collateral will go to auction (many times it is the lender himself). With the money obtained the debt will be paid and the excess will be returned to the previous owner.
3. Mortgage amortization
The APR applicable to the operation will be calculated on the agreed installments, establishing a depreciation table. Through the timely payment of the fee, the borrower will complete this chart until his mortgage is amortized.
The repayment or cancellation takes place when the loan has been repaid and its price paid. But the credit also fits:
– Extend. In cases where the borrower cannot take over the mortgage, he could agree on a new repayment schedule. Generally, this operation will have a cost.
– Pay off early. If you want to pay the credit ahead of time, you will have to pay commissions, which will compensate for the interests that the bank expected to receive during the course of the operation.
In short, a mortgage is an operation that can suffer alterations throughout its life. That is why it is important to know how mortgage loans work before requesting them. In Ideal Loans you can find and compare different loan options online.