What is a mortgage loan
A mortgage is a loan which you can use to buy, renovate, extend or build a home, using as collated a property you own. A mortgage can be granted over a period of 30 years. In general though this type of loan you can access a larger amount of money over a long period of time, therefore the interest rate for a mortgage loan is better then the interest rate for a unguaranteed loan.
The mortgage is registered within the Land Registry, and the collateral property can not be sold without the creditors approval, until the credit is fully refunded. Of course in the situation that you want to sell the collateral property this is possible, with the condition that the amount you obtain from the sale is used to pay off the loan.
You can use the mortgage loan for the following:
- Buying a home – for example, if you want to buy a house for the amount of 100.000 USD and you only have 25.000 USD, you can request a loan of 75.000 USD, using as collateral the house that you are looking to buy.
- Extend or renovate a home you already own or build a new one.
Other purpose mortgage loan – if you own a property that is not mortgaged or have a mortgage on it for a small amount, you can still use it as collateral to cover a loan for an important family event or any other plans.
- Interest (annual) – Interest is the price to be paid for the loan or the use of a certain amount of money over a certain period (1 year), namely the amount that a borrower (borrower) pays to a borrower (the lender) for the money borrow
- Advance – The difference between the value of the property brought into the guarantee and the amount of the loan (Advance + Credit = Value of the property; Advance is required only for mortgage purchase credits on the property to be purchased)
- Annual Effective Interest Rate (DAE) – includes all the costs involved in a loan: annual interest, file analysis fee, management fees (monthly or annual), whether it is a fixed amount or that it refers to a percentage of the outstanding balance of the loan.DAE is the most useful criterion to compare banks’ credit offerings
- LTV – collateral coverage – Represents the ratio between the amount of the loan and the value of the property brought under the guarantee according to the valuation report
- DTI – Degree of Liability – Represents the ratio between the total amount of the payment obligations arising from loans or other financing and income