Before taking out a mortgage, it is worth getting acquainted with the basic concepts that may appear when looking for the right loan. not infrequently, this concept is difficult to understand, convoluted and complicated for people outside the banking industry. however, after a short analysis and reading the definitions of these concepts, it turns out that the devil is not as scary as he is painted.
The most common terms that appear when taking out mortgage loans are:
borrower – this is none other than the person obligated to repay the money debt in the case of mortgage loans. They are most often natural persons,
creditor – this is a rather neat term for a bank, a creditor is a person entitled to receive from the borrower the receivables incurred as a result of a mortgage in the form of installments specified in the contract,
mortgage – a limited property right established to secure the repayment of a debt, or the right to use the premises. The mortgage is established for all mortgage loans,
land and mortgage register – to the official register, which aims to determine the legal status of real estate, which may be houses, apartments or land. Land and mortgage registers are kept by land and mortgage register divisions of district courts appropriate for the location of the entity on which the mortgage is established,
net and gross loan amount – the net loan amount is determined by the pure amount that the borrower has at his disposal, while the gross loan amount is the amount that the borrower has at his disposal, including interest and any husbands and bank charges,
own contribution – these are the borrower’s funds necessary to finance the purchase or construction of the building,
loan installment – this is the total capita installments, maybe the sum with interest to be repaid in a given settlement period, usually on a monthly basis. There are two loan installment options for mortgage loans. They are equal installments and decreasing installments,
equal installments – the same amount equal to the repayment throughout the loan period, this is the most popular option chosen by most of the bank’s customers,
decreasing installment – in other words , the principal and interest rate consists of equal installments of the loan principal plus the percentage of interest calculated on the current debt amount. In practice, the amount of installments at the beginning of the mortgage loan is much higher than at the very end of the mortgage repayment period,
loan period – the period from the date of conclusion of the contract to the end, i.e. the date of payment of the last loan installment,
creditworthiness – what about payments, because liabilities with interest and due bank margins,
insurance assignment – there are cases for the payment of compensation from the borrower to the bank in the event of health impairment, failure to repay the loan or death,
A loan promise – it is nothing more than a bank’s promise that it will grant us a mortgage for a specific amount at a specific time. it can be issued unconditionally or conditional, then it contains the conditions that must be met to obtain a mortgage, it is necessary when we want to move to a new apartment or house and we still do not have the loan granted,
fixed interest – it is an interest rate that does not change throughout the loan period and is not dependent on any factors and banking indicators. is established for a certain period and is valid until that date,
You can meet all these concepts when looking for the right loan that meets your needs. Therefore, it is worth knowing them in order not to be surprised, especially if you are planning a visit to the bank regarding a mortgage. The ignorance of the concepts does not explain anyone, so it is worth taking care of it in advance and systematically familiarizing yourself with typical banking terms, especially if you want to go through the entire process of obtaining a mortgage on your own.
The concepts presented are only a small part of the total terms appearing in mortgage loan agreements, so you should always carefully analyze them and understand the meaning of the concepts. With such large amounts for which mortgage loans are taken, there is no room for mistakes and guesses. The submitted signature guarantees that the bank has understood the agreement, so it is really worth understanding it.
Contrary to many votes, the mortgage is not as terrible as it may seem. Banks always clearly define their terms, which can always be negotiated within reason, so there is nothing to be afraid of. Proper preparation gives confidence and encouragement. For people who, however, do not feel confident in this subject, there are financial advisors who facilitate the implementation of obtaining a mortgage. They will take care of all formalities, from finding the best bank, offering the best loan, to completing documents, to the final process of signing the contract with the bank. The cost of such a service is relatively small compared to the loan amount.