Has the bank asked you for a mortgage guarantee to finalize the mortgage loan business? Wait, we are on time to analyze the business and explain what a bond letter is.
Let me guess. You chose to apply for mortgage loans with the bank you trust and not with funding the work … I get it : as a client, one tien d ea think it is better to have all products in a single financial institution. It’s great that they know you and treat you like a special customer. But, perhaps, at this time, you will have to analyze a moment if that business suits you. The mortgage guarantee may surprise you. It is better to be well informed .
Definition of Mortgage Guarantee
Home equity loans (also known as property collateral) are guarantees of compliance with a loan payment or a credit through a mortgage. This means that a property is placed as a guarantee of payment of debt.
To see it more clearly, if you apply for a loan, you can put your home as collateral or guarantee. So the person who lends you the money can charge your property in case you cannot meet the credit obligations. So your house is considered as a guarantee.
The mortgage guarantee is the right granted on a property to a person or entity with whom a debt or commitment is contracted, so that in case of such debt is not satisfied or the commitment breached, it has the possibility of becoming owner and sell said property to recover the borrowed money.
Mortgage loans and home equity loans
It is important to note the difference in nuance between mortgage loans and home equity loans.
The first are those that are requested to acquire a property. For this, it is necessary to prove a stable and solvent economic situation that allows to face the loan installments, but at the same time, the property itself functions as a mortgage guarantee, which means that if it is not possible to meet these installments, the property will change to hands of the bank.
Mortgage loans are usually granted for a maximum amount of 80% of the value of housing and normally require the appraisal of the property to be acquired and a previous study in which it can be proved reliably that the loan fee does not represent more than 35% of Demonstrable income.
Home equity loans are those that are requested for any purpose, and in which a property on property already paid is offered as collateral, although sometimes it is possible to request them even if the mortgage has not been paid in full.
These types of home equity loans allow access to amounts of money greater than those that could be obtained with a personal loan, and also do not require that the owner of the property have to cease the use of the home.
In addition, they allow the good offered as collateral to be sold, provided that the money received is used in the loan payment.
The mortgage guarantee allows to solve difficulties that would otherwise prevent access to credit. As it is a guarantee of great value, there are many lenders willing to offer money even to people who cannot credit income or with damaged credit history, provided they can provide a mortgage guarantee, since the value of this is, in general, more than enough to cover a possible default.
However, home equity loans do not only have advantages, since there is a risk of losing housing if payments cannot be made.
Advantages and disadvantages of home equity loans
- If you are the one who lends the money, you know that you will end up recovering the money with the property.
- As a borrower, you can receive large amounts of money for these types of loans.
- The requirements are quieter compared to other types of loans.
- You can get the money quickly.
- You can use the money for whatever you want.
- Some entities offer these types of loans, even if you are on delinquent lists.
- If you do not pay the fees you may lose your property.
- The property must be free of charges or paid in full.
- Fees and management fees apply.