12.07.2024

What Types of Mortgage Credit Are There?

Within mortgage credit it is possible to distinguish between various types of credit, which we will analyze individually and in more detail.

Home loans

As we’ve already mentioned, mortgages are the most common type of loan to take out, and we have to admit that it makes perfect sense, given the high value associated with this type of loan.

When someone takes out a home loan, they take out a mortgage on the property they are purchasing. This is how banks mitigate their financing risk.

In the event of a default, the institution can actually call in the mortgage, which will serve to settle the existing debt.

In addition to the fact that lenders can only finance amounts lower than the actual purchase price, this type of property also tends to appreciate in value and so lenders can put the property up for sale and ensure that they don’t lose out.

In the case of buying land for construction, the mortgage guarantee is on the land itself and everything built on it.

In other words, if you apply for a construction loan and there is an inconvenience that puts you in a situation of default in the middle of the work, the lender will keep the property as it is.

Consolidated Mortgage Credit

In the consolidated credit solution, you are not obliged to take out a mortgage, although it is possible to do so in some cases.

When you combine your loans into one by consolidating them, you’ll get a lower payment than the sum of your current monthly payments.

However, if you decide to mortgage an asset with this solution, you may be able to negotiate much more competitive conditions, guaranteeing even greater monthly savings.

Related Credit

Also known as multi-risk credit or multifunction credit, this is a solution that aims to use a mortgage credit as collateral for a new credit.

To make it easier to explain this type of credit, let’s imagine that you have already taken out a mortgage, as we saw earlier

The financial institution is already using this asset as collateral, but you may need extra financing to repair or furnish your new home.

As these additional amounts are not included in the value of the mortgage, you can use the related credit solution for this purpose, i.e. use the property already mortgaged to request an additional amount to be used for your home.

Bear in mind that the conditions of this loan will not be the same as those of your home loan, but they will always be much nicer than if you opted for a quick personal loan.

Finance companies allow some flexibility with this type of loan, which is understandable, since you’ll be adding value to your home, which is also an asset already mortgaged by the bank.

What Mortgages are there in Mortgage Credit?

As with the types of mortgages, there are also some variations when it comes to the types of mortgage, which we’ll go into individually.

As far as types of mortgages are concerned, we can look at voluntary, legal and judicial mortgages.

In a voluntary mortgage, there is a mutual agreement that is usually made between the financial entity and the end customer, when there is financing involved, such as a home loan, for example.

In the case of legal mortgages, the beneficiary is the state or any other public entity. In other words, in the event of non-payment of contributions such as Social Security, or even to the Tax Authority, the assets acquired will be mortgaged as a form of guarantee to pay off the debts.

Finally, a judicial mortgage, which is very common in insolvency situations, aims to use the debtor’s assets as a means of paying off the current debt, which is usually the result of a court judgment.