A loan secured by real estate is Definition, types of loans, stages of registration, expert advice

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

A real estate loan is a type of financial agreement in which an apartment or house acts as collateral. In essence, this is a mortgage. Citizens of Russia, trying to solve the housing problem, offer the bank already existing real estate as collateral. Is a real estate loan always a mortgage? No not always. And now we will find out when this type of financial relationship has the right to exist.

What is a loan and what are its varieties?

Depending on the amount requested, the loan period and the algorithm for obtaining it, there are several types of loans:

• Express lending (in this case, you can get a loan without leaving your own home).
• Credit for urgent needs (in fact, this is a regular consumer loan, the execution of which will not take much time and effort).
• A loan for education or medical expenses (usually educational and medical institutions take care of the paperwork for obtaining a loan).
• Vacation loan (similar to the previous one).
• Secured loan (such a loan is needed when it comes to a solid loan amount).
• Credit cards.

Today we are talking about a loan secured by real estate. This is a loan that is issued by a financial institution, secured by some property of a potential borrower.

Collateral

In some situations, the bank may require collateral. When does it happen? First of all, this applies to large loans (for the purchase of real estate, a car or the opening of your own business). The size of the requested loan may not be so large, but the financial institution still requires collateral - this is possible if the potential applicant does not have a complete set of documents or does not have a permanent source of income.

Collateral is the so-called safety cushion for a bank. In the event that the borrower for some reason cannot return the money, the lender will simply sell the property, which will compensate for their losses. It is clear that the pledge must have liquidity, since the bank is not going to look for a potential buyer for a long time. That is why a loan secured by real estate -This is a responsible decision for both the borrower and the lender. Both real estate and other valuables (bank deposits, boats, yachts, cars, etc.) can act as collateral.

What is a real estate loan?

Without certificates of income and guarantors, you can get a loan, owning a property or any other value. In addition to a solid amount, a potential borrower has the right to count on lower interest rates on the loan and a loyal attitude on the part of the credit department. A loan secured by real estate without guarantors is issued as a mortgage. It is worth taking into account this type of lending when you need a large amount - from 500 thousand rubles.

This opportunity is also used by individual entrepreneurs who plan to open their own business or expand production. As a rule, directed loans are much more difficult to obtain, so it is easier to provide collateral to the bank in order to obtain the necessary funds.

How to get a secured loan?

As a rule, such agreements are drawn up according to traditional schemes. First of all, you need to find a bank that can issue a loan secured by real estate. You can get it by providing a package of necessary documents. Please note that you need to prepare the relevant papers regarding square meters.

When applying for a loan, a potential borrower mustspecify what can provide collateral. After that, the client, if it meets all the requirements of the bank, must go through underwriting - a verification procedure. At this stage, the bank receives information about the state of the borrower's credit history, checks his source of official income, and also finds out if he owns real estate and whether it is under arrest. It would seem that getting a loan secured by real estate without certificates is much easier. But it's not. There are a few things to consider.

What you need to know about mortgage lending?

First of all, it is worth noting the following: any property needs an assessment. This means that the borrower must evaluate the collateral property from an independent appraiser. After that, insure against damage or damage. This will allow the bank to gain confidence in the value of the collateral. Here you need to understand that all related costs will be borne by the applicant.

The procedure for obtaining a loan secured by real estate in a bank requires much more time than obtaining a typical consumer loan. This is due to the fact that a financial institution must ascertain the reliability of its client. More checks - more time.

And one more thing. The value of the collateral must exceed the loan amount by at least 20%. Moreover, the higher the price, the more likely that the bank will approve the application.

How does real estate appraisal work?

This very moment takes quite a lottime, and all costs under this item are borne by the potential borrower. There are several options for assessing real estate. Assume the real value of the object can directly employees of the credit department. Not the best option, because they, like no one else, are interested in the low cost of square meters. But there is also a positive point here - most likely, an individual will not have to pay for the services of an evaluating commission.

There is another option - when the assessment will be carried out by a company accredited by the bank. In this case, additional costs appear, but the cost of the object will be assumed to be quite real, which will have a good effect on obtaining a loan. In any case, when obtaining a loan secured by real estate without income and guarantors, you need to think in advance about how the square meters will be assessed.

What else do you need to know about the property that will act as collateral? Many Russian banks require that no one be registered in the apartment or house at the time of signing the loan agreement. Like, so there will be no problems with the sale of property in the event of its further sale. In fact, these claims are unfounded. Since, in accordance with the law, a financial institution, that is, a creditor, can discharge and evict all residents of a given territory.

Distinctive features of a loan secured by real estate

Of course, the main distinguishinga feature of this type of lending is the presence of collateral and the related subtleties of registration. In turn, it is precisely this moment that does not allow you to take out a loan secured by real estate as quickly as an express loan, for example. As a rule, the entire procedure takes about 30 days, including all checks and assessments.

A loan secured by real estate is a rather risky type of financial transaction. First of all, for the borrower. In the event of a delay, the bank has the right to take the property, regardless of how much money has already been paid.

Despite such great risks and complexity of registration, a loan secured by real estate is often the only true and effective way to get the required amount.

Can I get a loan secured by commercial real estate?

Unfortunately, most often not. There are two reasons for that. First, commercial real estate is almost never the property of an individual. Legal - yes, but this is a completely different type of lending.

And secondly, if an individual owns commercial real estate, then it can be argued that a citizen of the Russian Federation is an individual entrepreneur. And this means that he needs a loan to carry out his professional activities. In this case, the bank should consider an application for a business loan, not a consumer loan. Again, this is a completely different type of banking arrangement.

Classification of mortgageloan

A loan secured by real estate without proof of income has two varieties. The first of these is a targeted loan. Its definition is quite clear - a loan for the implementation of specific plans. A potential borrower can take out a targeted loan secured by real estate to buy a car, build a house or start their own business. As a rule, a target loan is characterized by attractive interest rates and more convenient terms of use. The only negative is that when applying for a targeted loan to buy a car, for example, the applicant does not have the right to spend the funds on something else.

There is also a general purpose loan, which can also be secured by real estate. Here, the client may face higher interest rates for using bank funds. But at the same time, this type of lending allows you to spend the loan at your own discretion.

Documents required to apply for a loan

As already mentioned, when obtaining a loan secured by real estate, banks do not pay attention to the financial reputation of the borrower. But this does not mean that everyone who owns square meters will be able to receive money. After submitting an application, you need to start collecting the relevant documents:

• Passport of a citizen of the Russian Federation.
• Document confirming the solvency of the applicant.
• Documents that indicate the presence of real estate in the property of the applicant.
• Identification number.
• Married property owners must also provide a marriage certificate, spouse's TINor spouse, as well as a copy of the passport.
• Individual entrepreneurs provide registration certificate and income statement.

This list of documents may vary depending on each specific case and the direct requirements of the financial institution.

What can act as collateral?

As already mentioned, any property of a certain value can act as collateral. Personal vehicles, bank accounts, precious metals, securities and, of course, real estate. Let's talk about the latter.

When submitting an application for a loan secured by existing real estate, a potential applicant must understand that a farm building cannot act as security. In turn, an apartment, a country house, an office, a garage, warehouses, one way or another, can act as collateral. The pledge agreement for this category of property is subject to mandatory registration.

It is worth recalling that many Russian banks practice issuing a loan for the purchase of housing directly secured by the acquired square meters. Interest rates are high though. But often this method is the only possible one for those who have not yet become the happy owner of their own apartment.

What kind of real estate can act as collateral?

Yes, almost any. Cottages, townhouses, apartments, ready-to-live-in apartments and private houses. The main thing is toany of them was issued the right of ownership. In fact, the requirements for collateral real estate are almost the same as for purchased square meters. The law governing these legal relations is one, therefore the conditions are identical.

There is one nuance that is worth paying close attention to. Cottages and townhouses owned by a potential borrower can only be used as collateral in conjunction with the land on which they are located. What's wrong with that? There is practically nothing bad here, if you do not take into account the fact that the land plot itself can be leased. In this case, it will not be possible to provide the bank with collateral.

Based on the foregoing, we can conclude that it is possible to get a loan secured by real estate without proof of income and even with a bad credit history. The main thing is that the property meets the requirements of a potential lender.