The Difference between Secured Loan and Mortgage
Both credit products involve complicated loan processing procedure (a large number of documents and certificates from the borrower), and are issued for large amounts in both cases, they can exceed 70% of the cost of the house, apartment or another real estate. However, in its root, mortgages and consumer loans secured are two completely different forms of borrowing. Let us consider them in more detail in this article.
The loan secured by real estate
The loan secured by real estate is a classic type of lending. Its peculiarity is that such a loan is issued for almost any purpose for the Bank it does not matter where the money will be spent. It is obvious that the Bank has guarantees of debt repayment by the borrower in case of non-repayment of borrowed funds, the banking institution will be able to simply take away from the debtor the collateral object and sell it. With the money that will be received as a consequence of such implementation, the Bank will compensate for losses incurred due to the dishonesty of the borrower.
To get a loan secured by real estate, you must provide a full package of documents, which includes both a certificate of income of the borrower, issued at the place of his work and documents for the pledge itself a house, apartment or land. There is one important caveat if you make the house-the documents on the land on which it is located, are also required to provide.
After the fact of stay in property of the borrower of the property specified by it as pledge will be established, this property is subject to an assessment. Assess its experts, based on the average market value of such objects. After the estimated price of the object is formed, the Bank will be able to deduct a certain part from it say, 70 percent. This is what will be the amount that the borrower will be able to get in debt.
The mortgage is the same loan secured by real estate, but, at the same time, the pledge is the object of credit the apartment, house or land, which is purchased on borrowed funds. In the end, it turns out that the Bank, in case of non-repayment of the debt, will not take the property owned by the borrower before the loan, but the object for which the loan was actually issued.
Again, in the documentary question, the mortgage is made somewhat easier than a consumer loan secured. To begin with, before getting a mortgage loan, the borrower only needs to provide a passport and a certificate of income from the place of work. Documents for real estate, thus, it will be possible to provide later. This “time distance” is the main difference in the design of these credit products.
However, the mortgage loan also has restrictions on the purpose of obtaining, in contrast to the consumer secured it is issued exclusively on real estate. It is impossible to take it, say, for business needs. You can also find the difference in interest rates in the case of consumer loans secured it is lower than if you take out a mortgage. Again, this is due to guarantees on the part of the borrower-the Bank is more profitable to sell the property that was originally provided by the borrower than the one for the purchase of which the funds were issued.
Get a loan secured by real estate can be in the same banks where the mortgage is issued. As a rule, these are the largest banking institutions in the lending market. Registration is carried out on a pre-filed application and received its approval.