The mortgage can be taken either a mortgage or a mortgage loan in a bank or credit unions, as well as a loan from a parabank or a private individual. While this is the first solution, it’s a legal way to bypass 20 percent. own contribution required by banks, the latter, as a rule, is an illegal way to extort an apartment. Pursuant to the Act on consumer credit of 22 July 2017, only banks and credit unions are entitled to grant real estate collateral. All others who demand the pledge of real estate in exchange for a loan, do so unlawfully. You do not believe? Read!
How does a bank mortgage loan work?
Taking a loan against a bank property is a torment. The bank requires:
- real estate valuation,
- conclusion of an insurance contract
- several visits to the court.
Most importantly, however, a mortgage is legal and secure! What does it mean? That the terms of such a loan do not differ from the terms of other loans granted by banks. First of all, the interest rate pursuant to the Consumer Credit Act may not exceed four times the Lombard rate – most often it is simply the sum of the WIBOR 3M or 6M reference rate and the bank’s margin, the commission also does not differ from market levels. Secondly, the property is valued by a specialized company and the loan amount ranges from 60 to 75% of the value of the property proposed as collateral for the loan.
How does a private real estate loan work?
Taking out a loan against a private individual or non-bank institution is a seemingly very simple and pleasant process. When analyzing credit risk, private individuals do not require borrowers:
- income certificates,
- real estate insurance,
They also do not check the credit history of borrowers. Why? Because they care about signing a contract with a person in debt, with a bad credit history and inability to pay the debt. Most of these companies simply take advantage of the inbound situation of the indebted to extort a flat from them. How? First of all, they grant loans at a very high percentage – they can, because their activities are not regulated by any Act on consumer credit or mortgage, similar to commission. Secondly, they do not outsource the property valuation to a specialized company. And this results in the fact that they grant loans several times lower than the value of the property.
The result: A small loan turns into a huge debt that the customer is unable to pay back, so he stops paying it back and then he loses his flat .
Fast loan against real estate – via the internet but with a guarantor
A safer solution for those in debt, the unemployed and having a negative credit history will be to take out a loan with a guarantor who has property. Rapida Money has such a product in its offer.
Why is it safer than private home loans? Rapida Money is listed in the National Court Register, so like banks and other lending companies, it is subject to the provisions of the Anti-usury Act of 11 March 2016 and the Consumer Credit Act of 22 July 2017 – and that’s a guarantee of security for you.
Why does such a company grant loans to people in debt? The key here is the guarantor, which is for the company confirmation that you are trustworthy regardless of your credit history. If for any reason you cannot make a payment, it will have to be paid by the guarantor. And if you go bankrupt, then the guarantor will have to repay the remaining debt for you.
What to watch out for when pledging real estate?
First of all, what is signed! One should not forget that a real estate loan agreement with a private person is not a credit agreement, but a notary deed of selling an apartment with the option of buying it back. For how much? For the amount borrowed plus interest, which often exceeds the amount of debt several times. How it’s possible? Property in such a contract is simply a form of security, professionally this mechanism is called lawyers’ appropriation as security. By signing the loan agreement in the form of a notarial deed, some of the property rights are transferred to the borrower. And in the event of default, he is de facto given full ownership. Are you wondering how it is possible that such situations take place? The amendment to the Anti-usury Act of 11 March 2016 and the Consumer Credit Act of 22 July 2017 are legal acts that prohibit lenders from doing this. What’s more, they set the maximum non-interest loan costs – unfortunately they don’t include private individuals!
So how do you verify that a company that offers us a loan against real estate is not trying to extort a flat from us? Check it in the National Court Register – if it is not listed there, then it is not worth signing any contracts with it!