A mortgage loan, more popularly known as a mortgage, is one of the most important loans that a company or individual can request. Not only for the amount but for the consequences that your non-payment can have. As we have seen in recent years those individuals who have not been able to meet the payment of mortgage payments have seen how, in addition to being added to lists of defaulters such as financial credit institutions, they lost their homes as this was the guarantee in case of non-payment of the mortgage. Although some have been able to at least cancel the debt through a dation in payment for their home. That is why it is essential to know very well what a mortgage loan is and especially the expenses involved, before signing the deed of mortgage before a notary.
What is a mortgage loan
The definition of a mortgage loan, better known as a mortgage, is a type of loan that usually has as its main characteristics its amount, term, and guarantee. Any type of loan, for example a personal one, is after all a delivery of money that will have to be returned together with some interest, in a payment schedule prefixed in advance. But while a personal quick loan is short term, mortgages are very long term. Since they usually finance the purchase of houses and other types of real estate. So to return such high amounts in proportion to the monthly income of any person or company usually give terms of up to 35 years and even 40 years. Normally never beyond the retirement age, since during the working life is when more income can be obtained, although there are special cases. And precisely because it is a loan of such a high amount, more than 50000 euros almost always, the guarantees are maximum. Because in addition to the personal guarantee of microloans and consumer loans, there is always a real guarantee through mortgaged real estate. In other words, in case of default, not only does the person holding the mortgage respond, as in any loan, but also the property itself. Therefore, in situations of total default, housing is lost and the debt is still maintained because in Spain there is no automatic payment, but depends on the will of the bank.
What expenses does a mortgage loan have?
One of the characteristics of the mortgage loan or mortgage, is the high amount of expenses. That is why it is very important to use a mortgage simulator to know what will be the total expenses that we will have to finance out of pocket. Many of them are proportional to the amount, such as commissions, so that being a loan with a greater amount of money the expenses are higher. While other expenses of a mortgage loan are due to the formalization of the mortgage, as for example the expenses of notary and registry of the property. So we could say that the expenses of a mortgage loan are:
- Commissions: before the signing of the operation there are study fees as in personal loans, in order to analyze the financial solvency of the applicant, and in particular that is not in lists of defaulters such as financial credit institutions. But in a mortgage there are also expenses to analyze the real estate that will be the guarantee of the mortgage loan. For this, the bank studies that there is total ownership of the property, that there are no hidden charges, and above all what is the value of the property in order to establish the percentage of financing of the mortgage loan. The normal thing is that the bank grants between 60% and 80% of the appraised value, although according to the commercial offer there are cases in bankshave given up to 100% of the value of appraisal. That is why it is fundamental to make a comparison of the best mortgages. These appraisal expenses derived from the appraisal of the property or property to be mortgaged, are carried out by experts in real estate valuations of appraisers approved by the bank. After the formalization of opening we will have expenses for commission of opening, but it does not usually reach 1% of the amount of the mortgage loan. Given the high amount of money borrowed and expenses that usually involve a mortgage. Also in a mortgage there are usually commissions for early cancellation of the loan that serves as compensation for the bank for the loss of interest when anticipating the repayment of the loan. Especially if the mortgage is canceled in full by mortgage subrogation, ie by transferring the mortgage loan to another bank with better conditions.
- Expenses: as we said the mortgage has more expenses than a personal loan because it has to be formalized before a notary public deed, not a credit policy, which will then be registered in the property registry corresponding to the place where the property is located. But in addition to notary fees and registration fees usually also agency. That is in charge of making the collection and delivery procedures of the deed in registry as well as the payment of the corresponding taxes, such as 1% on the value of the mortgaged property as documented legal acts, except the VAT paid to the seller at the time of writing. All this to be able to register the deed of mortgage in the registry of the property, and thus make public the property and the new mortgage on the house or property. But in addition to all those expenses legally required for the formalization one of the essential expenses in a mortgage is the real estate appraisal in order to determine the value of the guarantee and thus set the percentage of maximum financing that the mortgage loan will have. Valuation report at market prices made by an independent expert, usually an architect or engineer.