A mortgage loan (from another Greek – prop stand) is a type of cash loan in which real estate acts as collateral. Theoretically, a car loan secured by real estate could be called a mortgage. But this practice has not taken root either in Russia or abroad.
The term “mortgage” appeared in ancient Greece at the beginning of the VI century BC. Mortgage was the name given to the form of liability in cases where the land served as security. In these instances, lenders drew up obligations, and they placed a pole on the border of the land area being purchased. The post indicated all the owner’s debts on such a pillar, called “mortgage” (from the Greek. Hypotheka – stand, support). In the future, the pillars “evolved” into mortgage books.
How it Works
The choice of real estate object – apartments, houses, or land.
Next comes the registration of the agreement of equity participation, insurance, and mortgage loans. Most often, a down payment is required.
The next step is closing the transaction and obtaining ownership with an encumbrance.
Then, you begin making monthly payments according to the schedule within the period established by the mortgage agreement. The amount consists of the interest for using the loan and part of the body of the loan.
Next on the list is depositing additional funds directly into the loan’s body, which helps reduce the loan term and the number of subsequent payments.
When the loan is repaid in full, the encumbrance is removed. A new certificate of ownership is issued.
If the client does not repay the mortgage loan according to the payment schedule, the bank may demand repayment of the debt at the expense of the mortgaged property.
How is a Mortgage Calculated?
A mortgage is an opportunity to acquire housing without own funds. It remains only to assess their strengths correctly. Often, a future borrower first collects the necessary documents, such as a 2-NDFL certificate to confirm income, and waits for approval from the bank. The search for real estate is narrowing. It already knows the available price range and can even calculate the monthly payment. It’s easier to make a decision.
You can choose a suitable mortgage program to indicate the type of property, its cost, and the amount of the down payment in one of the famous “mortgage calculators” on the Web. These mortgage calculators will give you an idea of the interest rate and monthly payment.
Mortgage Insurance
Banks have different requirements for insurance; some are mandatory, others are not. But even if they are optional, the interest rate is significantly reduced when they are issued. According to the federal law “On Mortgage” (102-FZ), collateral insurance is one of the conditions for obtaining a loan from a bank.
When applying for a mortgage on a new building – real estate purchased directly from the developer – banks offer to take out life and health insurance. This optional type of insurance positively affects the interest rate and the likelihood of mortgage loan approval.
Life and health insurance protects the insured in case of temporary disability, in case of disability of group I or II, and the possibility of premature death.
When applying for a mortgage on a secondary property – real estate that was previously owned – banks require property insurance – this is a mandatory type of insurance. They may also ask for title insurance and life and health insurance.
Property insurance protects against financial losses in case of actual death or the occurrence of risks such as explosions, fires, or natural disasters. Everything is related to structural elements.
Title insurance protects against material loss in the event of failure of ownership, for example, due to the appearance of an heir whose opinion was not taken into account. The company that issued the title insurance would reimburse the cost of real estate to the client or his bank if the borrower purchased the apartment with a mortgage.
Applying for insurance products in the same bank where the mortgage is issued is unnecessary. You can choose the insurance company that will offer the most comfortable conditions.
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