Anyone who is thinking about buying a property and wants to use a mortgage certainly heard about the mortgage. It is intended to secure the creditor in the event of default. A bank that borrows several hundred thousand USD for several dozen years must in fact secure its interests.
A mortgage is a limited property right that gives the creditor (in this case the bank) security on the property in the event of the borrower’s default. A mortgage arises when an entry is made in the land and mortgage register appropriate for the property and expires after you repay the mortgage.
As a property owner, you can continue to dispose of it, but a mortgage allows the bank to assert its rights, regardless of whose property it is.
Mortgage – how does it work?
A mortgage may be charged on the ownership of real estate (including land), the cooperative right to premises, the right to perpetual usufruct, the right to a single-family house (in a housing cooperative).
Simply put, the mortgage works so that if you stop paying off your mortgage installments, then the bank, sometimes with the help of a bailiff, will sell the property you finance to get your money back.
Take a mortgage for your dream apartment – see how easy it is! Mortgage – what about late payments?
By signing a mortgage contract, you agree to pay your installments on time, on the date you specify, based on your repayment schedule.
If you are late with paying the installment for more than 14 days, you will definitely receive a phone call from the after-sales service department, and then from the debt collection department of the bank where you have the loan. If you are still unable to pay the arrears, the bank will send you a prompt for which you will have to pay dearly.
Debt recovery is the bank enforcement order
The next stage of debt recovery is the bank enforcement order (BTE). You can find the entry for BTE at the end of your loan agreement. Read it carefully – it is there that the deadline is set for when the bank will apply to the court for help in collecting the money borrowed. Within a few weeks, the court will give BTE a title of enforceability, and then the bailiff may take action.
When you receive a letter from the bailiff about the seizure of real estate and a call to pay the debt under pain of initiating the enforcement procedure, you only have 14 days to raise money. If you fail to settle the arrears within this period, the bailiff will make an entry in the land and mortgage register and set a date for the inspection of the property.
There will be a public auction later. The property will be sold in the presence of the bailiff and under the supervision of the judge.
The money obtained – in the first place – will meet the needs of the bank and bailiff ( enforcement, litigation costs, real estate valuation), then other mortgage creditors and finally creditors who have not secured their claims with a mortgage.
Under the Act (on mortgage and supervision of mortgage brokers and agents), which has been in force since mid-July 2017, the bank may launch a bailiff at the earliest after 6 months. He must also let the owner of the property find a buyer and sell it himself – thanks to this he has a chance to get a higher amount.
Are you interested in the subject of a bailiff’s auction? Or maybe you are thinking about buying a property in this way? If so, read this article.
Mortgage – the best offers on the market Mortgage and land and mortgage register
If you have already been interested in a mortgage, you have certainly heard that by the time you get a mortgage entry, your loan installments will be increased.
Why? Because of the mortgage, and thus the rights arising therefrom can be enforced only when the land and mortgage register of the property is completed. Until the entry is made, the bank bears a higher credit risk, which it compensates with a higher installment.
Part IV of the land and mortgage register is entirely intended for a mortgage. Therefore, knowing the land and mortgage register number, you can easily and quickly check if the property you are thinking about is mortgaged.
The lack of any entries in the fourth section of the land and mortgage register does not mean that nothing will appear there in a moment. Like all courts, these land and mortgage registers also need time, and it takes a few weeks to even several months to get an entry.
Therefore, when an application for establishing a mortgage is received by the court, it will be mentioned in the land and mortgage register. In this situation, it is wise to wait with the purchase and check the entry carefully.
Contractual and forced mortgage – differences
With the home loan, you will meet the term contractual mortgage. It means that two parties (you, as the new owner of the apartment and the bank that loans the property) agree on the terms of its establishment.
What, then, is a forced mortgage? Well, this one can arise without the will or even the knowledge of the property owner.
Such a mortgage can be assumed, for example, by a construction company that has worked as a subcontractor with a dishonest developer.
Therefore, before signing the development contract, it is worth paying attention to some important details related to the fulfillment of rights and obligations on both sides.
Similarly, in the secondary market – if you are in debt, your creditors can apply for a mortgage entry to get your money back.
Can I sell a flat with a mortgage?
I don’t know if you realize that the mortgage is attached to the property and not to the owner. So if you are thinking of buying a flat with a mortgage, remember that you, as the new owner of the property, will be obliged to pay off the mortgage.
If you are buying a flat, make sure that the seller of the premises gives you a document that allows you to delete the mortgage and securely buy the flat.
The mortgage probably motivates the most to pay the loan on time.
Many people choose a long-term loan because they can’t afford to spend several hundred thousand USD, and the banks that borrow this money cannot afford such a step without solid security. If you want to calculate the exact cost of your mortgage, use our calculator.