Mortgage credit

A mortgage loan is the loan of a significant sum of money that the bank makes to a client, this money is destined for the sale, repair or extension of a house or dwelling; This method is very useful when it is necessary to carry out these different processes and there is not enough money to execute them. This loan can be granted with a variable time interval between short and medium term.

What is a mortgage

A mortgage loan refers to a loan that is requested in the medium or long term, it is granted by the bank for the purchase, application, construction or repair of a home, as well as offices or commercial premises.

This credit is not only granted for the acquisition of a home to live in, it is also approved for the purchase of real estate, offices, commercial premises or similar situations, in other words, any project in which the acquisition of a building or enclosure.

The way in which the bank ensures that the client returns or cancels the money granted, is by keeping the property in the name of the bank, in this way it plays an important role since it remains in the form of “guarantee” to what is known as “mortgaged”, until the client or the beneficiary complies with the payment in full.

The terms granted for the payments of the monetary sum are implemented in a contract between the bank and the beneficiary, these must be clearly explained to avoid confusion since they are subject to changes in the interest rate and in the costs of the households.

Acquiring a mortgage loan does not have to be an eternal burden for the client’s pocket, to the point that it makes it impossible to cancel other necessary expenses for the day to day of each human being, for this reason the mortgage payment should not use more than 15% of the salary obtained per month.

The term has its origin in the Latin credere, which means to believe, although there are also other meanings with the word certum dare, whose meaning alludes to giving the truth.

On the other hand, there is the word mortgage, which comes from the Greek hypothek and refers to a deposit or box. In other languages ​​the term is written differently, for example, mortgage in English is written mortgage.

What is a mortgage

Mortgage loan - Mortgage

It consists of receiving money from the bank and this in exchange for the debt, while it is canceled, a guarantee in the form of material goods corresponds: a house, a car, land or some property that exceeds or equals the amount of the debt. The debtor is given a term to pay, if he does not comply with the regulations, the bank takes definitive possession of the guarantee.

It is a type of debt, only it differs from natural debts because it has the guarantee, that is, the reservation for the entity that makes the loan (bank) and that guarantees that the loan is safe and that if the indebted person does not comply with your obligation, the property you mortgaged will serve as payment of the debt.

Characteristics of the mortgage

As with other terms, the mortgage contains its own characteristics and elements that individualize it and differentiate it from other concepts similar to it. Among the most particular characteristics of this term are the mortgaged assets, the mortgage contract, which in turn has its own classification, and finally, the payment installments. Each of these features will be explained below.

mortgaged assets

They are part of a legal agreement that conveys conditional ownership of an asset from its owner (the mortgagor) to a lender (the mortgagor) as collateral for a loan.

The lender’s security interest is recorded in the registry of title documents for public information and is voided when the loan is paid in full. Virtually any legal property can be mortgaged, although real property (land and buildings) are the most common.

mortgage contract

Mortgage loan - Mortgage contract

It is an agreement between the creditor and the debtor, that is, a real contract of guarantees that allows the creditor to ensure the collection of the credit, but this is done by taking possession of a certain asset of the debtor, so that it can collect the amount of the sale in the remote case that the debtor does not comply with the main obligation of the contract. In this case there are three elements, capital, interest and term.

  • Capital: this is the total amount of the resources that have been lent to the debtor, this capital is less than the value of the asset that has been left as collateral.
  • Interest: covers the collection of a percentage that can be variable or fixed, but this is on the debt for the benefit of the person who grants the loan.
  • Term: it is the one that stipulates the period in which the money that has been lent by the creditor must be returned.

mortgage payment installments

These are all those elements that help calculate the amounts that must be paid on the mortgage. In some banking institutions there is a web page with an option entitled “calculate your mortgage”, there the terms and fees appear, whether fixed, variable or mixed, as well as a mortgage simulator to perform these calculations. In this aspect, these quotas will be explained briefly.

  • Fixed: these are those installments that have the same mortgage interest during the useful life of the loan, this means that the monthly amount will never vary, not even when the market interest rates increase or decrease.
  • Variables: are those in which the interests have references, which can be Euribor (interbank reference indices) with a fixed spread. This means that the monthly amount can change according to the interests of the market, something totally different from the previous aspect.
  • Mixed: it is a combination between the fixed rates and those that are variable, according to this, the interests are maintained for a certain period, however, after that period, it becomes a variable rate.

types of mortgages

As with the characteristics, this term has two specific aspects that will be explained below, the first has to do with legal mortgages and the second with those known as voluntary.

legal mortgages

They are those that arise properly from the law and where there is no intervention of the individual will. These mortgages are exclusively by law and their main objective is the defense of the interests of the treasury in each state, it is also in charge of protecting individuals whose belongings are in danger of being embezzled by the people who are in charge of their management.

The individual who is in the presence of a legal mortgage, specifically the creditor, is in full capacity to use the rights that support him, over all the real estate that belongs to the individual who owes him, in addition to them he will have power over any possession that may be acquired by the debtor in succession to the mortgage.

Voluntary Mortgages

It is a total opposition to the legal one, since it is defined as an agreement between the parties, although it is also possible that they have been imposed by the disposition of the owner of those assets for which said credits are being established. These can only be constituted by those that have a free disposition of those assets or, failing that, that have authorization.

Differences between credit and mortgage loan

Although both terms are closely related, in reality they have certain differences, one of them is that the credits are granted to the client, but the bank is protected with a mortgage guarantee, this means that the client has total or partial access to the money obtained from the bank. Now, regarding the loan, it is a totally closed contract, that is, the bank lends a previously fixed monetary amount and is backed by a mortgage.

Related concepts

Mortgage credit - Related concepts

There are various topics in which this term is related, one of them is the social mortgage, although it is also possible to talk about a change of mortgage or, in extreme cases, in the cancellation of the mortgage. All these cases will be explained below.

Mortgage Novation

It is a way of extinguishing obligations and requires the pre-existence of a legal relationship and the unequivocal will of the parties to terminate it and replace it with a new obligation.

The unrestricted will of the parties to terminate the previous contractual relationship and replace it with a new one should be considered as an essential element of the novation. This can be considered as a change of mortgage from one bank to another.

strategic default

The term strategic default generally implies the decision of a debtor to stop complying with the corresponding payments, that is, by default on a certain debt, despite having the financial capacity to make the payments thereof. This is considered a mortgage cancellation, but in order for this to be fulfilled, a mortgage cancellation letter must be filed.

Floor clause

They are one of the requirements established in the mortgage contracts, in which minimum limits are established for the interest that will be obtained, since these cannot be quoted under this figure.

mortgage subrogation

It is a modification or subrogation of a debtor or a creditor and is part of the types of mortgage novation.

Frequently Asked Questions about Mortgage Credit

What is a home mortgage?

It is an agreement between a creditor (bank) and a debtor (client) to obtain real estate, in this case, a home.

What is a mortgage for?

It works as a guarantee to insure a movable or immovable property.

How do you apply for a mortgage loan?

Through a form and taking all the requirements requested by the bank to the corresponding entity.

How does a mortgage work?

As an agreement between the parties and in turn, as a guarantee.What is the mortgage guarantee?

It is a legal safeguard in which the goods are insured to guarantee compliance with the obligation.