Understanding mortgage credit

Understanding mortgage credit

For the financing of a small, medium or large real estate project, resorting to a mortgage loan would constitute a good alternative on condition, on the other hand, of being in possession of one or more real estate properties.

What is a mortgage loan?

What is a mortgage loan?

Whether you are a professional or an individual, you can apply for a mortgage loan as soon as you own a property. This money will constitute a mortgage for the borrowed capital that the creditor bank will agree to grant you. If you will no longer be able to reimburse the monthly payments, the lender has the right to seize the property and will be responsible for putting it on sale.

Like a conventional loan, the subscription of a mortgage loan also requires the establishment of the amount of the loan and the duration of the loan. The terms of this type of credit do not differ either from a usual loan with the possibility for example to repay it in advance or to adjust the monthly payments according to the state of your budget. The mortgage rate can also be either fixed or variable.

What about the repayment tenure of a mortgage?

What about the repayment tenure of a mortgage?

Compared to a conventional loan, a mortgage loan is a long-term loan whose repayment duration can be spread over 20 to 25 years or more. The duration of the loan is established and adapted according in particular to the borrower's repayment capacity. The debt ratio is calculated according to the income of the loan applicant compared to his monthly expenses as well as what he has left to live.

The total cost of your loan as well as the monthly payments to be paid depend above all on the duration of the loan. The longer it is, the more interest you pay. It is then necessary to opt for a period that would be most appropriate for your current financial situation. You should know that the last monthly payment should not be fixed beyond the 90 years of the debtor.

Mortgages are considered secured loans, meaning that they’re backed up by an asset — the house — should the homeowner default. When the borrower defaults, lenders are permitted to take back the house, which is called foreclosure. For this reason, some lenders require borrowers to take out some kind of insurance, such homeowners’ insurance, which covers material damage to the property, or mortgage insurance, which protects the lender in case the borrower defaults.