Do you need cash for any purpose and you care about the lowest interest rate? Compare different real estate loans and choose the most favorable option.
Pledged loans – how does it work?
If you are the owner of any real estate – apartment, house, office space, plot or arable land – you can use it as collateral for a loan. In exchange for establishing a mortgage in the land and mortgage register, you can get a loan of up to 80% of the property value.
Establishing a mortgage does not change your rights to the property – you still remain its owner and can use it freely.
Real estate loans, also known as mortgage loans, are often a much more beneficial solution than cash loans. For people who are in a difficult financial situation, they can also be the only way to get a loan for a large amount – in the case of companies it can even be several million USD.
Real estate loans and cash loans
Bank mortgage loans can be an attractive alternative to a cash loan. If you plan to renovate an apartment, vacation, wedding, buying a car or any other expense, consider financing this way. Why?
- Like a cash loan, a real estate loan is granted for any purpose. This means that you don’t have to declare what you are going to spend the money on. This distinguishes a mortgage from a mortgage, which must be used to buy or renovate a property.
- A loan against real estate can be granted for a much longer period than a cash loan. Thanks to this, your monthly installments may be lower.
- By choosing a cash loan, you can get a higher amount of money. While the maximum amount of cash loans is about 150-200 thousand. USD, a loan against real estate may be granted even for 80% of the value of a house, flat or plot. This means that if the market price of your property is 500 thousand. USD, you can borrow up to 400 USD.
- Mortgage loans usually have a much lower interest rate than cash loans. While the best loan against real estate bears less than 5%, the actual interest rate on the most favorable cash loan is 9.66%.
If you don’t own a property, you still have the chance to take out a mortgage. All you have to do is find a person who agrees to let their property secure your loan – for example, a partner, friend, parent or another family member.
Real estate loans – formalities
To get a mortgage from a bank, you’ll need to provide documents that will prove your ownership of the property. They can be:
- excerpt from the land and mortgage register of the real estate,
- notarial deed confirming the purchase of the real estate,
- act of donation,
- excerpt from the land register,
- real estate valuation made by a real estate appraiser,
- property photos,
- certificate of non-payment of rent in a cooperative or housing association.
In addition, as with other banking procedures, you will need to provide documents on the basis of which the bank will assess your financial standing. Usually, these are:
- proof of income,
- contract of employment,
- account statement.
After submitting your mortgage loan application, the bank will also check your credit history in GFI. If in the past you had problems with timely repayment of loans, maintenance or telecommunications bills, this will be recorded in the database and may affect the bank’s refusal.
In order for your property to be considered as collateral for a loan, it cannot be encumbered with any other obligation. This means that if you are still paying off the mortgage for a flat, you cannot use it as loan collateral.
I am looking for a real estate loan – what about non-bank companies?
Loans against real estate are also granted by non-bank companies. This option can usually be used by people who are in financial difficulties.
Unlike the bank, they will often not require income or employment certificates from you, nor will they check your credit history at GFI. To grant the loan, documents confirming ownership of the property are sufficient.
Non-bank real estate loans are usually associated with considerably worse conditions. The maximum repayment time is usually 36 months, and the APRC reaches even 40%.