When you buy a house, you usually need a loan to do so. That loan is often provided by a bank, an insurance company or a pension fund.
A bank does not make a loan on blue eyes. A bank wants security. You then grant a right of mortgage to the bank. This means that your house becomes collateral, the bank gets a priority position, so that the bank has (as much as possible) certainty that the bank will get the lent money back from you. If you do not meet your obligations, the bank has the right to publicly sell (auction) the collateral (your house) and pay the debt from the proceeds.
Thus, the right of mortgage is granted by the owner of the collateral (the mortgagor) and, once the mortgage deed is signed, the creditor is also mortgagee or mortgagee.
That can seem confusing:
- the lender (the bank) is the mortgagee;
- the borrower (that is, you) is the mortgagor (because he gives the right of mortgage to the bank).
The right of mortgage applies not only to the loan itself, but also to an amount for any overdue interest, penalties and costs (such as auction fees). Therefore, in the mortgage deed, you will see three amounts:
- the principal (the loan itself);
- estimated interest, penalties and costs (a percentage of the principal); and
- the sum of 1 and 2.
Arranging a mortgage is not an easy process. You have to submit a lot of information to the bank. Often this is done through an advisor. That starts with requesting a mortgage quote. Once you have received that quote and you agree with it, you send the mortgage quote back signed. Based on all the information provided, the bank will give its final approval of your application.
The bank then sends an order to the notary asking him to prepare the mortgage deed. The mortgage deed is then prepared by the notary. The deed is signed by you (and your partner, if any), the bank and the notary. The bank is usually represented by an employee of the notary.
After the signing, the notary ensures that the right of mortgage is registered at the land registry. This registration is public, so anyone can inquire what mortgage debts exist.
You may have heard that mortgages can be registered higher. You then give a right of mortgage higher than the amount of your money loan ("increased registration"). You then have the option of taking out an additional loan from the same bank in the future, for example for a remodel. You must meet the bank's requirements: your income must be sufficient to pay the additional loan and your house must have sufficient value. After all, the bank wants sufficient security.
The advantage is that you no longer need a mortgage deed for that additional loan. So you don't have to go to the notary again. You do face possible advisory or closing costs from the bank or an advisor.
A possible disadvantage is that you can really only go to the same bank; in fact, another bank takes into account the right of mortgage for the amount of the higher registration. In fact, another bank has no influence on that. This gives less room for negotiation when it comes to the terms of the money loan. By the way, most banks have a prohibition in their general conditions for additional rights of mortgage.
Want more information? Then contact us. We are happy to help you !
Want more information or have questions? If so, please contact us.
We are happy to help.