Maybe you have heard a person who had a mortgage loan say: “What happens is that the bank wants to keep my house.” And you started to think that sometimes people have those beliefs, but fortunately this is not the case. The business of a bank, financial or savings and credit cooperative, in general terms, is to give money on loan, collect the interest fees it generates and at the end of the term, they return the money to be able to give it to another applicant.
And here comes the figure of the mortgage, which means that if someone wants a quantity of money as a mortgage loan, they must offer one or more real estate as a guarantee that they will pay it and if they do not do it in time and under the conditions agreed, will deliver that property or real estate, which if not, the entity will execute the mortgage to collect the debt.
RS Chase Lawyers is a law firm that can help you clarify any questions you may have regarding this matter. Do not hesitate to contact us.
What you need to know about
The real “trick” of the financial business is the marketing of cash to lend it and the real estate does not have the characteristic of “liquid”, or at least, cannot be available immediately; therefore, when an extraordinary asset enters these entities, a negative impact occurs because a quantity of money is captive in that asset and cannot generate interest, but the bank does have to pay them to its account holders and partners.
So the bank that least wants and seeks is to run mortgages. It almost always loses. So if you are going to apply for a mortgage loan, the bank or the financial institution will do everything possible to eliminate the temptation in you to assign that property. Therefore, if you are going to apply for a mortgage loan, the bank or financial institution will do everything possible to eliminate the temptation in you to give up that good.
That is why these entities make a series of economic, social, real estate and financial analyses to assess the risk of foreclosures. For this, three important components are evaluated, among other things.
Here the entity will verify that you will pay for it, that it will be able to resolve the debt, that it has adequate and sustainable long-term monthly income that exceeds 30 percent of the calculated quota.
Also, that you are solvent, that you have an adequate equity and that you have no more debts than you can pay, and above all, that you have a good credit record.
Here an appraiser enters into action that will determine, through an analysis of the property, the market and the risk, a bank value to which the entity will apply a reserve according to its credit policy, with the hope that this final value will exceed the amount of the requested loan.
The destination and use of money are also very interesting to the entity, since they feel better if the loan will be invested in something that guarantees liquidity. Otherwise, it is likely that they establish other conditions, according to the levels of risk that the project or company that the applicant will have with that capital.
Now, it is important to determine the relationship that will exist between what you will pay as a fee or credit, to compare it with the profitability of the project you wish to finance. You should know that the fee payable will include two elements: a) the interest fees that generates the loan, and b) an amortisation to the capital.
Loan interest fees will always be charged to you. No financial institution agrees not to charge them under any circumstances. This is your business. The financial entities are integrated by investors and these, with all the reason, will require their dividends or profits on time.
The amortisation to the capital is the amount proportional to the borrowed capital that you must pay so that at the end of a certain period, it is cancelled.
So, are mortgages good or bad?
There are 2 relationships between the fee to pay and the profitability of your project.
One is positive and the other one is negative. The positive one is when you will generate higher returns with the money you were given compared to what you have to pay in instalments, including your profit. These returns must be the net operating income, this net income – and discounted all the expenses required – will be derived from the operation or start-up of your project.
The refusal is when your net operating income is below the fee that you will pay the financial institution, and here there will be problems.
Before proceeding with the formalisation of the contract, you have the right to have a copy of the public deed project in the office of the notary (which you have the right to freely choose), at least during the 3 working days prior to signing. It is important that you examine this document carefully, and that you verify that the conditions reflected in it are those previously agreed with the entity, included in the binding offer. In case of detecting any discrepancy, ask the bank to correct it before signing the contract.
Keep in mind that you have the right to have the notary or notary chosen to formalise the mortgage advise you, advise impartially, help and report free of charge and understandable in the contracting of mortgage loans. Take this opportunity to resolve all your doubts about the contract and have everything clear before signing.
Remember that we are here to help. Here at RS Chase Lawyers we will offer the assistance you require in order to improve your decisions on a daily basis. We will protect your interests and help you throughout the entire process when you are looking for mortgage or taking a mortgage case to court. Contact us!