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Mortgage - what is it?

If you want to buy a property and you do not have enough funds, you will surely come across a banking product such as a mortgage. Although there is a lot of talk about this type of loan, it is worth taking a closer look at them. What is a Mortgage? Where does applying for a mortgage start?

What can you learn from the article?

Mortgage - definition
What does it mean that it is on purpose?
Mortgage - where to start?

Mortgage - definition

For many, a mortgage is one of the most serious financial obligations they make in their lives. Most often it is a commitment that stays with us for many years. In short, taking out a mortgage means that the bank provides financing for the purchase of an apartment or building a house. However, before we start applying to the bank for financing, it is worth finding out what a mortgage is.

Will the regulations contain information about what exactly is a mortgage contract? The legal definition of this banking product can be found in the Act of 23 March 2017 on Mortgage Loans and on Supervision of Mortgage Brokers and Agents. gives him a promise to grant a mortgage-backed loan intended to finance the acquisition of the ownership right to a building or dwelling, cooperative ownership right to the premises or land ownership.

So, as the definition indicates, a mortgage loan means that the bank provides financing, e.g. for the purchase of a flat, and the property for which the loan was granted is the collateral for the debt. If the borrower fails to meet its obligations to the bank on time, the institution may take over the property.

What does it mean that it is on purpose?

A mortgage is a specific financial product because it is a target and long-term loan, and it is secured by a mortgage established on real estate for the benefit of the bank.

Mortgage - what does it mean that it is on purpose? The expediency of the loan means that the bank provides financing for the purchase of an apartment or building a house. The funds may not be used for any other purpose. So we can not spend a mortgage, for example, to buy a car, or in any other way, as in the case of a cash loan. The money must be used to buy real estate. Hence, when submitting an application for such financing, the bank requires an appraisal report, i.e. determining exactly how much the property you want to buy is worth.

Mortgage - where to start?

If you are planning to buy a property and want to take advantage of a mortgage, the bank will first verify some important issues.

First of all, your creditworthiness, i.e. whether you will be able to pay off your commitment on time. Banks take into account here:

The amount of own contribution - it should be 20% of the value of the property you want to buy. Among the banks' offers, there are still those in which own contribution may be at the level of 10%. However, they are connected with the necessity to take out additional insurance for a low own contribution.
Monthly income - how much do you earn and whether your income is stable. Will you be able to pay off your monthly installments on time and without delays?
Form of employment - are you employed, for example, on the basis of an employment contract or on another basis.
Financial obligations and other loans - are you paying off your loans now and have you fulfilled your obligations in a timely manner in the past?
The loan amount you are applying for and the repayment time

Remember that if you have any doubts, I am happy to offer you advice and assistance. Let's meet, you will find that my help in choosing the best mortgage can be invaluable.

Feel free to comment. Is the topic of credit analysis interesting for you? Let me know in the comment. Will be happy to help clarify all issues. It is important to me that every topic regarding the mortgage is absolutely explained.