Lending is not based solely on trust. Rather, banks and savings banks seek security from borrowers that is of such high quality that it reduces the risk of default to a comfortable level.
A large part of the collateral offered always revolves around the topic of creditworthiness, which is composed of an attractive income, a permanent position and a positive Credit Bureau. Added to this are material and financial collateral. Material security can be, for example, a property that is owned by the borrower. If it is high enough to provide good security, it will make borrowing a lot easier.
How can the value of a property be determined?
If a loan is to be taken out with real estate security, it is important that the property has a certain value. Only if the lending bank can cover the debtor’s open debts when the property is auctioned is it of sufficient value and can be used as collateral in the loan.
In order to be able to check this, the current value of the property is important. In addition, it must be checked whether there is already a land charge on the property or whether it is free of debt. The bank will not only request a land register extract for the review, but will also sometimes prepare an appraisal report. However, the latter is only necessary if the loan is very large and requires a high level of security.
In general, as a borrower, you only have to take action if the bank requires it. It goes without saying that the property is proposed to her as security. However, expert opinions and other documents only have to be provided when the bank requests it.
When is a property security loan worthwhile?
A loan with real estate security is always worthwhile if you are not just looking for a simple small loan or consumer loan, but if you want to raise large amounts of credit. While real estate is always considered collateral for a real estate loan, it can also be used as collateral for installment loans that are not earmarked. And even with renovation and renovation loans, a loan with real estate security can be the perfect solution.
What needs to be considered?
Nobody likes to risk their own home when it comes to securing a loan. Therefore, careful consideration should be given to when and how a property security loan will be taken out. In general, it is advisable to still insure such a loan with a residual debt insurance or a risk life insurance. In the event of unemployment or a long illness, the property is not immediately in danger, but insurance can always be sought first.
It is also important that the property that is offered as security is actually owned by the borrower. If he is only a partner, he can only be liable for his part of the property. This sometimes severely reduces security, which could lead the bank not to recognize the property as security. Because she rarely wants to become the owner of a property. Rather, the property is to be auctioned in the event of payment defaults in order to cover the costs. However, this is not possible if there are multiple owners.
Last but not least, also with a loan with real estate security: If you compare well, you will ultimately save a lot of money. It is therefore worth using a comparison calculator in advance to check the quality of various offers. This effort then pays off in the form of savings that can quickly amount to several thousand USD.