If this term does not refer to the loan itself: what is a mortgage? This term comes from the Greek word hypotheke and designates a pledge. This means that the person obtaining a loan to build or buy only receives the amount requested by depositing a pledge as security. . The creditor can be a credit institution or an insurance company. These creditors, in the event of non-payment, have the right to proceed with an operation of pursuit in the realization of the pledge, the right of the pledge being able to be the subject of measures of forced execution.
Normally, the mortgage note acts as a pledge. This is a paper value attesting to the right of pledge. The mortgage in the proper sense of the word is very little used nowadays. The explanation is simple: it only has a guarantee function without being incorporated into a paper value, which is itself intended for trade. The mortgage note exists in two forms: the traditional mortgage note on paper with the obligation to keep the document and the registered mortgage note, registered in the land register. For the latter, there is no paper value strictly speaking.
How does a mortgage work?
To obtain a mortgage from a bank, the customer must meet two criteria: rate of advance and rate of indebtedness. The advance rate is the ratio of the amount of the mortgage to the market value of the property, which must not exceed 80 percent. Therefore, 20 percent of the market value of real estate must come from equity, knowing that it is not only a question of wealth in cash, advancements of inheritance, or loans from family or friends. Second and third pillar capital can also be withdrawn for this purpose or pledged. The second criterion that the borrower must meet: is a debt ratio that must not exceed 33 percent. This is the ratio of the annual cost of the property to the annual gross income of the client(s). The annual cost of real estate consists of mortgage interest, depreciation, and maintenance.
If the potential customer meets these two criteria, it is finally possible to define more precisely the amount of the mortgage loan: the sum which, in addition to the equity of the customer(s), will be necessary to be able to finance the property in question. Broadly speaking, three forms of mortgages can contribute to the financing of a property, namely the fixed-rate mortgage, the LIBOR mortgage, and the variable rate mortgage, the last two evolving depending on changes in interest rates.
All three have specific advantages and disadvantages. It is only after having made a detailed analysis of his situation that one should begin to compare several offers for the same scenario, by focusing on banks as well as insurance. But the compatibility of these offers with the borrower’s situation and their quality is difficult to assess without having an overall perspective of the market.
MoneyPark offers you detailed advice to answer all your questions about your mortgage. Since our independence is our core business, it is your wishes and ideas that take center stage in our consulting activity. Together, we choose with you among the products of more than 150 financial partners the mortgage which offers you the best conditions. Make your appointment request immediately!