The term mortgage does not always conceal one identical product. Mortgages differ not only in their volume to value ratio, but also in other parameters and additional services. For modern mortgages, for example, it is possible to pre-negotiate their amount several months in advance, or to temporarily finance the transfer of membership rights and obligations. Thanks to the current favorable conditions in the mortgage market, it is also possible to obtain a mortgage for the entire value of the property and the equipment that is functionally connected to it. At the same time, legislation still allows mortgage interest to be deducted from taxes. “If someone is delaying the acquisition of real estate, in 2013 should go to action and the real estate market carefully examine. In the following years, the conditions in terms of mortgage interest and real estate prices may not be as favorable. Today’s mortgage market options will satisfy the vast majority of those interested in own property, ”said Junas Almstad, Chairman of the Board of Directors and CEO of Jeopard Finance, a mortgage lending consultancy.
A mortgage will save worries and possibly money
It is often necessary to respond very quickly to a real estate offer. First of all, you must make a reservation deposit. Furthermore, you should get an estimate of the price of the property, even with some banks even without their help. But what if your bank refuses your mortgage application because of low creditworthiness or some credit register entry? There is a useful product on the market called a mortgage on the contrary. It works by first approving the mortgage in the required amount and at the same time approving the maximum mortgage framework. The contract with the bank then allows you to find your property in the next up to nine months and thus complete the mortgage process with a credit facility and a collateral facility. On the other hand, the mortgage eliminates the situation when you make a non-refundable deposit to the real estate agency and the bank then refuses the loan because of low creditworthiness or bad payment discipline.
You can use a pre-mortgage loan for a cooperative apartment
A characteristic feature of mortgages is the guarantee of real estate against credit. However, there are cases where a lien on a property cannot be established at the time of purchase. A typical case is the purchase of a cooperative apartment. In fact, it is not a purchase but a transfer of membership rights and obligations. The owner of the apartment is a cooperative. Similarly, the right of lien cannot be established in the case of privatization of a municipal flat or an auction property. However, a special product of some banks, negotiated under the name of a pre-mortgage loan, can be used to acquire such real estate. This mortgage mutation does not require a lien for a limited period of time, but it is sufficient to confirm the cooperative that the apartment will be transferred to private ownership. During the period of drawing the pre-mortgage loan, the client pays only the interest, and once the apartment is transferred into private ownership, the bank will enter a lien in the land register. At that moment, the client starts to draw a mortgage loan, from which the pre-mortgage loan is paid off and the principal and interest are repaid by default.
100% mortgage, or when you have nothing saved
When buying a property, it is ideal to have some of your own savings, whether in the form of cash or building savings. However, not everyone has savings of at least 15% of the value of the purchased property. In such cases, some banks provide mortgages up to 100% of the value of the property. Banks even offer the opportunity to finance ancillary costs associated with investment property. Specifically, it can be the acquisition of kitchen, financing project documentation or commission real estate agency. However, a mortgage at 100% of the value of the property brings with it a higher interest rate.
The key to successful mortgage refinancing is to start early
Your attention should not diminish even after negotiating a mortgage. This is usually concluded for 20 to 30 years, so its total price must be monitored in the long term. Keeping mortgage payments at market lows allows refinancing. This means that you can repay your existing mortgage by lending it to another, cheaper bank at the time. However, the key to successful mortgage refinancing is to start on time. You should negotiate a new mortgage loan at least 6 weeks before your existing mortgage is fixed. It is not worthwhile to wait until the bank comes up with a proposal for new interest rates. By that time, you should be clear how much your competitors will lend you. At a minimum, this information can help you improve your bank’s terms and conditions.
With a mortgage you save on taxes
The law allows the interest paid on the mortgage to be deducted from the tax base. It is possible to deduct up to USD 300,000 per year. With the current 15% income tax rate, the tax savings can be up to USD 45,000. In addition to ownership, the condition is to use the property for housing. In the case of a cooperative apartment, the client cannot fulfill the condition of ownership, so it is sufficient that the condition of permanent housing is met. However, it should be emphasized that if you use the property for a purpose other than housing, ie for business or rent, the deduction is not possible. However, if you rent an apartment, it is possible to claim expenses in the form of rent. Therefore, you will mainly apply interest, but also insurance, which is necessary for mortgage financing. However, then you need to consider whether you will incur these actual expenses or it would be preferable to use a flat rate of 30% for rental income.
Your apartment as an investment or mortgage will be paid by someone else
The current situation, when property prices have fallen as well as mortgage lending rates, has been investing in housing. Not only in connection with pension reform and old-age security, there are often talks about alternative ways of valorizing money or preserving its value. Real estate investment is relatively safe and resists inflation. “The optimal option is to purchase a smaller apartment, which you rent and you pay the mortgage installments. With a little effort, the situation can be adjusted so that the rent covers all costs. Once you have repaid the mortgage, the rent is your next income. Of course, you can also sell the apartment or make it available to descendants, ” explained Junas Almstad from Jeopard Finance.