Receiving funds secured by real estate is a fairly common type of loan. In this case, the real estate acts as a guarantee that the borrower, even with an unfavorable development of events, will be able to return the money on time. However, not every real estate object can act as collateral.
Popular types of lending have undergone a number of changes in recent years. The economic crisis is forcing banks to be very wary of issuing funds. For this reason, the requirements for obtaining a loan have become much more stringent.
To obtain a loan for a substantial amount, the bank's client must prove to the credit institution his solvency and guarantee the return of the amount taken. One of the most popular guarantees is real estate mortgage.
In the most general sense, a pledge is a property of value that, if the borrower defaults on obligations, can be sold in order to pay the debt. The value of the collateral usually exceeds the amount borrowed. If the borrower repaid the loan on time, the collateral remains in his ownership.
Credit institutions usually consider several types of real estate that can serve as collateral. The most common collateral is an apartment, house, land and commercial property.
A number of stringent requirements are imposed on real estate, which can act as security. First, it must be owned by the person who is the borrower. Another's apartment, even with the consent of its owner, cannot be considered a pledge.
The second requirement: real estate must be liquid so that it can be quickly sold on the market in order to receive a sum of money. If it is difficult to sell an apartment or house, then the lender will have nothing to compensate for the losses. That is why the loan repayment can only be guaranteed by real estate that can be quickly sold at current market prices.
Another requirement concerns the value of real estate offered as collateral. It must ensure the full repayment of the debt. If the market value of the collateral changes over time, the bank may renegotiate the terms of the agreement or require the borrower to provide additional guarantees for the return of the amount.
Minors should not be registered with an apartment or residential building that is transferred as collateral. If the property belongs to both spouses, then it can become a pledge only with the consent of each of them. Real estate should not be under any other encumbrance (for example, be pledged for another loan). If the property is seized or is the subject of legal proceedings, then it cannot be a pledge.
There is no chance of becoming a collateral for a house or apartment that is in disrepair or even just in poor technical condition. The bank will not accept the dilapidated house as collateral for the loan. The best chances to become a collateral have a property in good condition, located in the city center.
It should be remembered that the bank takes land plots as collateral with reluctance, because it is extremely problematic to assess their liquidity. It is desirable that the plot prepared for collateral should be large enough. The land must also be registered in accordance with all the rules. A land plot located within the city limits is much more preferable for collateral than one that is located a hundred kilometers from the city.
