A house with a garden – for many people this is still the classic lifestyle. One possibility – if by far not the only one – to finance this dream is the inclusion of a mortgage loan. The assignment of the mortgage by the owner to the bank secures the loan granted – and the owner receives more favorable interest rates, as would be the case with a “simple” loan.
What is actually understood under a mortgage, which criteria are to be considered when concluding a mortgage loan and which banks offer favorable mortgage loans, can be found in our guidebook !
What is a mortgage?
The word mortgage comes from Greek and means as much as mortgage. The rights to a property are assigned by the person who takes the object (house, land, apartment, etc.) in order to receive other services. These benefits are usually cash benefits. The mortgage is used in banking as a collateral for loans. The value of the mortgage is determined by the value of the object.
A mortgage is considered a mortgage. If the debtor does not solicit his credit, the creditor can satisfy the claims from a foreclosure sale of the property. However, the mortgage is always tied to a financial claim, such as a real estate financing. The mortgage is referred to as the legal basic type of real estate collateral. The legal basis for the mortgage is laid down in the Civil Code (BGB) (more also at http://wirtschaftslexikon.gabler.de/Definition/hypothek.html )
Is a mortgage always entered into the land register?
Yes, mortgages are always entered into the land register. This ensures the creditor’s right to the secured property. Meanwhile, the mortgage in Germany is less frequent. Only about 20 percent of all mortgages are secured by mortgages. On the advance, however, is the basic debt.
Is the mortgage maintained when I repay the loan?
The inclusion of a mortgage is usually associated with the inclusion of a loan – but this is not absolutely necessary. Personal receivables from contracts can also be covered by mortgages. If the debtor pays his financial obligations bit by bit , this also reduces the initially agreed mortgage. The mortgage shrinks parallel to the settlement of debts. If the claim has been repaid, the mortgage remains registered in the land register until the bank has issued a “creditable receipt”. If the debt is completely repaid, the mortgage falls back to the owner. The mortgage then becomes an open owner.
What happens if the claim is not repaid?
If the claim secured with the mortgage is not repaid, then the owner is obliged to enforce his property by the creditor. Payments to the creditor can prevent enforcement.
What is the basic debt – and what is the difference compared to the mortgage?
The mortgage is – as well as the mortgage – a security to obtain a loan for a property. Mortgage and mortgage are two different mortgage liens. In the case of a mortgage, the real estate buyer pledges its object to its creditor, usually to the bank. This has the certainty that, in the event of the insolvency of the real estate purchaser, they still get their money. The mortgage is therefore associated with a specific claim.
Otherwise, the basic debt: it can be used beyond a certain demand. Even after the loan has been repaid, the basic debt can continue to be used as collateral, for example when a debt restructuring takes place. In contrast to the mortgage, it is possible for the creditor in the case of the ground fault to immediately forbid the obligatory land ownership of the debtor without a previous action in court.
A further difference to the property: Not only the property, but also the other assets of the debtor can be executed, ie also pay negligence and other assets are possible.
Can several mortgages be taken on a property? And what happens when the payment is late?
Yes, there are several mortgages on a property. If the claims are not met and charge several mortgages on the property, there is a fixed rank, according to which the mortgages are satisfied.
Do I need to borrow a mortgage if I want to get a loan?
Not necessarily. This depends, on the one hand, on the amount of the loan and the existing equity and on any other collateral. Who “only” needs a credit of about 50,000 euros, can also provide other collateral, eg a guarantor. In addition to a mortgage loan, there are also alternatives, such as building loan loans, KfW loans or foreign currency loans – for those who are not afraid of financing. (Source: http://www.baufinanzierungsrechner.net/baufinanzierungen/ )
What types of mortgages are there?
Various mortgages are differentiated in banking. The various types of mortgages depend on the financial scope, the level of risk and the individual situation. In principle, a so-called repayment mortgages are taken up for the real estate loan. Furthermore, there are, for example, mortgages and variable mortgages. When mortgages a mortgage of up to 60-70 percent of the market value of the property is granted. If this is not sufficient, a second mortgage can be taken.
What does a mortgage loan cost?
An annual interest rate and an annual redemption rate are agreed upon at the beginning of the contract for the redemption mortgage. Mortgage interest rates are usually significantly lower than interest rates for a normal installment loan because the loan has already been collateralized by the property. Compared to the building loan loan, extraordinary expenses are incurred for a mortgage loan, such as the notarial authentication of the mortgage contract.
The cost of a mortgage or a mortgage loan consists of the following items:
- Disagio, thus the “Abgeld” (owner gets less money than is registered in the land register),
- Interest (the lower the disagio, the higher the interest),
- Loans (charged for loans made but not yet paid),
- Processing fees of the bank,
- Costs for expert opinions on the value of the financed object,
- Costs for notarial authentication and authentication of the mortgage contract (certification is clearly more expensive),
- Cost of the land register entry
How can I find favorable conditions for a mortgage loan?
Here just compare, compare, compare! In a low-interest phase, as at present (as of 06/2013), there are obviously much more favorable interest rates. However no matter how the overall economic situation looks, a comparison of various offers is always recommended. With loans of 100,000 euros or more, even a number behind the comma can signify a big difference in the later monthly burden.
What are the advantages and disadvantages of a mortgage loan against other forms of financing?
- Low interest rates due to basic security
- Variable or fixed interest rates
- Premature special payments are generally possible
- Additional costs by entry in the land register
- Object can not be resold
Can I rent my house – despite mortgage?
Yes, you can. The property is pledged to the bank over the actual credit period, but the property can still be freely used by the owners – and thus also rented. The house can be sold, however, only when the debt has been repaid.
How much real estate can I afford?
In any case, equity should be at least 20, most preferably up to 40 percent. The purchase of a property without equity is only useful with very high salaries. In addition, the cost of a property also depends on the current interest rate, ie the mortgage interest rate. Currently (as of 2013) we are in a low interest rate and the interest rates are in the basement – the interest in our own property is increasing. Currently there are loans with a ten-year term of less than 3% – a very good offer. However, such a broad decision should of course not only depend on the interest rate level. However, anyone who played with the idea of buying real estate should now strike.
For a loan for 100,000 euros with a loan of 60% and 1% repayment, the borrower or debtor at Santander Bank currently (06/2013) pay extremely favorable 3%. Also favorably: Axa, DBV Deutsche Beamtenversicherung, BHW-Postbank, Deutsche Bank, SKG Bank. (Source: http://baufinanzierung.santander-direkt.de/ )
How much money do I have to have monthly to pay the mortgage?
Experts advise not to spend more than 40 percent of the budgetary charge on interest and amortization so the mortgage can be paid. A longer interest rate linkage can reduce expensive follow-up financing.
What are the risks associated with a mortgage?
The mortgage loan is certainly the most popular type of real estate financing. So that you can sleep peacefully even at night, you should pay attention to the following points:
- The equity ratio should be at least 20-30%. The mortgage loan should not be more than a maximum of 70 per cent of the value of the property so that the mortgage can be re-serviced in the event of a loss in value.
- Conclusion of contract in low interest rate = long interest rate fixation
- The initial redemption rate should not be too low, so that the home financing does not extend over 30 or even 40 years. Usually, the house is paid off at the latest when the owners retire.
- Pay attention to the ancillary costs associated with mortgage financing (estimation costs, provision charges, etc.).
What is a Reverse Mortgage?
In recent years, the reverse mortgage has always been in the headlines. As a result, retirement can be increased in old age. The real estate acquisition still applies today as a safe cushion for old age – but what if the pension is small and money is missing?
A reversal mortgage can help: the property is lent. This means that the older owners of the property receive a loan – but this has to be paid only after the death of the owner. Thus, either the property is sold or the heirs take over the repayment. The property can be lent up to 50 percent for most providers. Older people can use this program to raise their pension – and still live in their own property.