This is how mortgage loans work. Have you ever needed financial help and had to resort to a financial institution to apply for a personal loan? Well, mortgage loans, also known as mortgages, are not so different from these loans.
How does a mortgage loans work?
A mortgage loan works as follows: a financial institution gives you a loan to buy a house, apartment or land; to carry out a construction or remodeling, under a contract that stipulates payment in certain installments and with an interest rate. While the loan is running, your property remains as collateral and once you cover the agreed amount, you will obtain a legal document called a Certificate of Lien Release, which will state that the property is yours and has no debt.
What can I use a mortgage for?
The most common use of mortgage loans is in home financing but, contrary to what most believe, you can request and use a mortgage loan for different purposes such as:
➤ Buy a home. It can be a house or apartment, new (even pre-sale) or used. You choose.
➤ Buy a piece of land. Make it private property.
➤ Build a house. Regardless of whether the property is private or ejido.
➤ Expand or remodel your current home. The amount awarded can be up to 50% of the total appraised value of your home.
➤ Get liquidity. If you already have a home, you can obtain a mortgage loan for it to invest in other options.
How much can I get from a mortgage loan
It is difficult to establish an estimate of how much you can get to buy a house, because in each financial institution the amount varies depending on the type of credit and the economic reference.
Types of mortgage credit
There is an extensive classification on financing for houses that you can access, but at this point we refer to the applicable interest rates that you can choose:
➤ Fixed rate. This interest rate does not change and is agreed from the moment the mortgage loan is requested.
➤ Variable rate. The percentage of interest provided can go down or up each year, depending on the economic situation.
➤ Mixed rate. The variable and fixed rate are combined and established depending on the interests of the applicant.
Before applying for a mortgage loan, you should inform yourself, compare and determine who offers you the best cost-benefit according to your needs. Remember that this represents a great commitment since the house itself is the one that will guarantee your payment responsibility. So do not take it lightly, any breach can put your assets at risk.
How long do I have to pay a mortgage loan and how to cancel the mortgage
Be patient, paying a mortgage will take considerable time. Most financial institutions offer you terms of between 7 and 30 years and each one has influence over the interest percentage they provide you. Obviously, the longer the term you select, the higher the interest rate you will have to pay.
At the end of the agreement, after you have covered all the established deadlines and do not have any debt, the Certificate of Lien Release mentioned above will be issued, it will expose the current legal situation of the property, that is, that it does not present any debt and that the entire process has been completed legally.
Actually, the whole process of how mortgage loans work is similar in most financial institutions. The only thing you need is to carefully know and understand each element that intervenes in it and make a decision that favors you.
Follow us through this guide so you can find the mortgage loan that will help you become the owner of your assets.
I hope that this information has been of great help and satisfaction to you, so continue reading more articles published on this website so that you continue to learn much more about the different loan that you can see.