In order to fulfill your dream of owning your own property, taking out a mortgage is common practice. Read what needs to be considered.
In times of low-interest rates, many have the dream of owning a home. A mortgage is one way to finance the construction or purchase of a property. By taking out the so-called mortgage loan, the borrower makes the mortgage available to the financing bank. This will secure the loan granted. But what exactly is it and what special features should you take into account with a mortgage?
What is a mortgage?
The term mortgage comes from the Greek and means something like a mortgage. The purpose of a mortgage is to secure a loan taken out from a financial institution such as a bank or building society. As a result, the borrower assigns the rights to a property (e.g. house, apartment or property) in order to receive consideration in return. These are usually cash benefits. The property thus serves as security for the credit institution and in return grants the property owner a loan in order to be able to finance the property.
If the debtor (owner) no longer serves his loan, the creditor (bank) has the right to sell the property for the purpose of repaying the loan as part of a compulsory auction. A mortgage is always notarized and entered in the land register. In addition, a notarized certificate is required to order the mortgage.
The amount of the mortgage essentially depends on the value of the respective property or the amount of the loan applied for. However, it is also limited by the mortgage lending value of the property. The sum of the mortgage shrinks to the same extent as the debtor pays off the loan. In a legal sense, a mortgage is – like a mortgage – a mortgage. Their legal bases are regulated in the Civil Code ( § 1113 BGB ).
How to take out a mortgage
If you want to take out a mortgage, you have to meet a number of conditions. To get a mortgage loan from your bank, applicants should generally meet the following requirements:
- permanent employment
- permanent employment
- positive budget statement (including debit from new loan)
- Creditworthiness (no negative Schufa entries)
- existing equity
If you meet these requirements, your property can be pledged to the bank. After you have agreed on all the conditions with your financial institution, the notarized entry in the land register and the issuance of a certificate are made.
The bank is thus co-owner of the property until the loan has been repaid in full. Only then does the entry in the land register expire. To do this, the bank must issue a so-called erasable receipt. The mortgage then falls back to the owner and becomes an open owner debt.
This is the cost of a mortgage
The total cost of a mortgage or mortgage loan is made up of various items:
- This “discount” is the amount that the creditor retains as an advance payment for the loan interest. The debtor, therefore, receives less money than was entered in the land register.
- Commitment interest (also from compound interest)
- processing fees
- Costs for property valuation
- Notary fees for certification and certification
- Cost of registering the land register
Mortgage: How to minimize your financing risks
If you want to take out a mortgage, you should have some equity. A share of at least 20 percent is recommended. This ensures that the mortgage is secured even in the event of a loss in value. In addition, a long rate of fixation is advisable if the current rate on the capital market is very low. This ensures an attractive interest rate for a long period and minimizes the total financing costs.
In contrast, the rate fixation should be correspondingly variable at a currently very high-interest rate level. However, this also harbors the risk of a further increase in interest rates on the capital market. You should also calculate the term of the financing precisely. Low redemption rates may seem tempting at first, but dragging on the overall funding period. Therefore, calculate whether the property is entirely yours when you retire.