With a non-purpose mortgage loan, virtually anything can be financed. Most often, however, people take a special-purpose mortgage, and then they finance the usual properties, such as housing units or land.
You can also finance the construction of a family house or the settlement of co-ownership in the case of inheritance or divorce. In extreme cases, you can also finance a separate land, field or pond. But this is less common. Most often it is a house, apartment or cottage.
What should you focus on when choosing a mortgage?
When choosing a mortgage, you can make a number of mistakes that are difficult to solve. At the beginning, it is important to distinguish whether the construction of a property or a simple purchase is to be financed by the loan.
Financing the purchase of an apartment or house using a mortgage
When buying a property, it is necessary to calculate the total cost of the mortgage and not just monitor the interest rate. It is also important to know whether management fees are involved, such as making an estimate, approving a loan, what are the regular mortgage fees, whether the client’s bank forces them to have a current account or not. And if so, under what conditions.
The two most important parameters you should focus on are the total cost of the mortgage and the way you draw money.
On the other hand, the bank may sometimes motivate to set up an account and give the client a discount on the interest rate. Another parameter can be life insurance. Some banks give a discount if you have a life insurance policy. You need to find out whether it pays to take out life insurance and get a discount or not.
It also depends on the length of interest rate fixation. In general, shorter fixation is better because the mortgage is easier to pay or refinance on better terms, without unnecessary penalty fees.
Mortgage financing for construction
In addition to the interest rate, there are a number of related parameters that you should pay attention to. Fees and their amount are important. But the main thing is the way of drawing money during construction . Other parameters that need to be addressed are the same as in the case of a purchase.
If the client does not stop another property, the bank does not pledge in this case. The value of the property is gradually increasing during construction, and the bank thus also gives the client money gradually. There are the biggest differences between banks. First, in fees, then whether the bank requires all invoices or not. If not, clients can save a lot.
Furthermore, it is important to know if the bank requires an assessment of the current value of the collateral at each drawdown or just a few times. The difference is whether you pay a drawdown fee three or fifteen times. Or even thirty times. In the case of construction, it is therefore necessary to focus more on the way of drawing than on the interest rate .