In the financial sector, the guarantees used to facilitate loan approval are well-known practices.
Mortgage credit is an agreement that aims to use an asset as collateral for the payment of your loan, thus making it easier to negotiate better conditions, such as lower interest rates, longer payment terms and even higher financing amounts.
Even so, it’s important to know that this is a solution that also carries some risks, so it’s essential to assess your financial situation assertively to avoid putting a high-value asset at risk.
In this article, we will analyze all the details of this type of credit, so that you can learn more about its particularities.
What is a Mortgage Loan?
Mortgage credit is nothing more than a type of credit in which the client has the opportunity to add an asset to their contract as a form of security.
These assets are usually real estate, but there are other types of assets that can be mortgaged.
In fact, you can use a car or even a boat, regardless of whether the mortgaged asset is yours or someone else’s, in which case you will need to provide documentation proving that the person in question authorizes this mortgage.
Without a doubt, the most common type of mortgage is a home loan, since as a general rule, when this type of loan is taken out, the property purchased is mortgaged until the end of the contract.
Bear in mind that this concept is also applied to a loan for the purchase of land and construction.
Unlike real estate guarantees, in car loans the mortgaged asset can be the vehicle itself, through the reservation of ownership.
This is a way for lenders to guarantee some security, as this type of asset tends to depreciate in value, unlike real estate.
In essence, mortgage loans end up giving financial institutions the guarantee that they can recover the amount financed, reducing their risk to the client.
On the other hand, those who take out the loan will benefit from better conditions, especially in terms of the interest rates contracted, because the institution will facilitate the process, since it will have a guarantee on its side, which it can use in the event of a default situation.
What are the risks of mortgage loans?
As we’ve seen, the simple fact of offering the institution a guarantee can make it easier for you to get the financing you want, although there are always other variables to take into account, such as your effort rate.
However, the benefits you can get from a mortgage solution come with a number of added risks.
All these risks imply the existence of a situation of irregularity in the payment of the installments of the financing obtained, in other words, a situation of default, which is sufficient reason to tarnish your Statement of Liabilities.
In this case, be aware that you could lose not only the amount financed, but also the real estate or movable property that you mortgaged when you took out your loan.
Bear in mind that in this situation, if you have mortgaged someone else’s property, these will also be called into question, i.e. if you have asked a close relative to help you obtain your loan and they have agreed to take out a mortgage on your property, for example, this means that if you stop paying your installments, the bank will contact your relative and may foreclose on the property.
To avoid this, you should always consider applying for a loan where, even if a mortgage guarantee is provided, there is a good safety margin against default.
