How to get a loan secured by real estate: apartments or houses
May 6, 2019
In the process of selecting a loan program, the future borrower assesses several parameters at once, paying particular attention to the availability of the loan and the final overpayment of interest. On the other hand, the lender, considering the application, carefully examines the client’s file and its solvency. When there are doubts about the successful consideration of the application, the exit from the situation will be a loan secured by an apartment. Similar offers are in the portfolio of any large bank. Favorable conditions are provided in return for guarantees of return, secured by pledged property.
The bank can accept various types of property as collateral, however, real estate remains the most reliable and stable option, allowing the lender to issue loans with minimal risk to themselves.
Can I get a loan secured by real estate
One of the most well-known lending options with a mortgage is a mortgage. Thousands of families purchase loan apartments each year, pledging them as collateral until the debt is paid in full. However, in addition to the mortgage there are many other programs that allow you to take a loan from a bank on the security of an apartment, house, etc.
To get a line of credit, the borrower must confirm his flawless payment dossier, which is not always possible. If under standard conditions the client can increase the chances for approval, submitting a request for a loan secured by an apartment, with overdue loans on previous loans, this option may be the only possible option.
The program has many advantages for both parties, but it entails additional risks and restrictions for the borrower. In order to successfully receive and return funds to a bank taken on collateral loans, it is necessary to carefully analyze the details of the program and examine the conditions signed in the contract.
Why take a loan on the security of a house or apartment
Lending with collateral is not accidentally in demand. In some situations, it is the only possible solution to the problem of financing, in others it provides additional advantages and benefits, because taking a loan on the security of an apartment can be at a lower interest rate (on average about 11.0%), increasing the available amount taking into account the cost offered pledge of housing.
A secured loan is an excellent alternative to both consumer lending and mortgage, combining the characteristics of both programs, based on the objectives pursued:
- The acquisition of new property under construction. Unlike a mortgage, the bank will not put forward special requirements for the subject of purchase, without limiting the choice of the borrower. Making a home purchase in a house under construction at a low cost, the borrower uses the bank’s funds, and after putting the property into operation sells the apartment and settles with the lender, while earning a profit in the form of the difference between the price of the loan and the sale.
- Construction of the house or the overhaul. If funds are needed for the construction of a residential house, you can use a more profitable option with a pledge instead of the need for a loan, saving the overpayment to the bank.
- Raising capital in the stage of opening or expanding a business. It is difficult to find a bank that is ready to give a loan to an entrepreneur. In addition to extreme vigilance regarding any investment in a startup, the conditions offered by a financial institution are far from ideal. If a borrower takes money with a guarantee of repayment of debt with interest, without reporting on the purpose of the money, the chances of getting good conditions are greater if you transfer personal property to the bank as collateral.
- Acquisition of secondary housing in the absence of personal funds for the purchase. Allows you to do without a down payment and do not spend time agreeing on a future transaction. It is an excellent alternative to the classic mortgage.
- Urgent search for additional funds. When the financial situation of the borrower is temporarily out of control, force majeure circumstances have arisen that require large expenditures; instead of expensive microloans or inappropriate consumer programs, it is more reasonable to arrange a loan with collateral. The bank will provide the amount, evaluating the proposed option of the collateral and calculating the optimal limit, which guarantees the break-even of the lender.
If you are going to borrow money from a financial institution, it is important to remember the risk of losing your property if it is not possible to repay the debt on time.
What apartment is suitable bail
As in the case of mortgage transactions, the financial institution must be confident that if the scenario develops negatively, the debtor will refund the amount along with the accrued interest and penalties. For this reason, a number of requirements are put forward to the pledged property confirming high liquidity and the possibility of a quick sale of housing in the event of non-return.
Most banks require compliance with the following characteristics:
- location of the object in the region of presence of the bank;
- location in the house, excluding the extreme floors;
- satisfactory condition of the apartment, equipment with necessary utilities;
- low building wear (excluding emergency and dilapidated buildings awaiting demolition or major repairs);
- full compliance with the planning documentation;
- registration in a private property without any restrictions and encumbrances.
Banks issuing loans secured by real estate
If you are going to get a loan for an apartment, you must first conduct a thorough study of existing banking programs, paying attention to the following parameters:
- The size of the bet.
- The available amount of the limit (set on the basis of a certain percentage of the estimated value of the object – 60-80%).
- Duration of repayment. If there is no guarantee of a quick return of funds, it is recommended to pay attention to loans with maximum terms (up to 30 years) with the possibility of early repayment.
- Prompt decision making (of particular value if money is needed urgently).
- Additional insurance costs and related expenses.
Separately consider proposals where you can take borrowed money, citizens with a damaged reputation. Different financial institutions have a different approach to the client’s credit history. If there are past due delays, it is recommended to examine the list of banks known for their loyal attitude to borrowers.
Do you give a loan secured with a bad credit history
If a person has a bad credit history, it will not be so easy to get a new loan. If there are problems with loan repayments in the past, it will be necessary to limit the search for the optimal program to the offers of lenders that put forward minimum requirements for future clients.
It should be prepared that even the presence of property that can be pledged will not allow a large loan to be obtained – most of the offers will limit the limit to 60% of the value of the pledge.