What is a consolidation mortgage loan?
A consolidation loan may turn out to be a remedy for all those who pay off several loans and are not satisfied with the conditions under which it is carried out. It allows you to create an individual offer and reduce the installment. The real estate mortgage is the repayment security for the bank.
The basic assumption of a consolidation loan is to convert a few expensive loans into one cheaper one. The housing loan taken for several decades often becomes a liability that we are unable to repay regularly. Especially if we add the installment for electronic equipment, car or debt on the credit card. It’s easy to fall into the vicious circle of borrowing more loans.
One way to solve this situation is to convert several installments into one in another bank. Coming to the competition, we have a chance to get a reduced margin and fees. It is possible to consolidate the following liabilities under such a loan: housing loan, car loan, mortgage loan, cash loan, cash loan, liabilities under a credit card agreement, credit in a savings and settlement account.
The condition for obtaining a consolidation mortgage, however, is having creditworthiness, securing a loan for real estate, and a good history in the Credit Information Bureau. It is important not to have significant delays in paying back commitments so far. Recurring problems with the regularity of paying installments, as well as delay longer than thirty days may cause that we will not receive a consolidation loan. The history of five years is important for the bank.
Banks offer different payment options: they may have been equal or decreasing, depending on the client’s preferences. Some offers have so-called “Credit holidays” that you can take once a year. The condition is the timely repayment of installments for twelve months, in some cases, twenty-four months of regular payment is required to have a grace period. An additional convenience in many offers is the chance to borrow cash for any purpose under a consolidation mortgage loan.
Examples of periods for which such a loan can be spread are 30 years.
Creditworthiness and the value of real estate determine the value of the consolidation loan. It can not be more than 80% of the value of the collateral. An appraiser’s assessment necessary to calculate this amount is the borrower’s cost.
Most often, a property whose mortgage is a loan security must be owned by the person applying for a loan, but there are cases in which it is allowed that it belongs to a third party who agrees to the loan.
In the case of mortgage loans, long-term repayment is secured by a real estate mortgage. This means that the bank will have pre-emptive rights to the property before other creditors when the borrower will not be able to repay the debt. Regardless of who the owner of the flat will be, the bank can claim his rights.
The purpose of a consolidation loan is to convert several loans that charge the borrower to one with a more convenient installment. This offer is addressed to people who simultaneously pay off various types of loans and are looking for a way to change their situation by securing a real estate mortgage. This is a beneficial way out of a situation that is meeting more and more people in times of economic crisis: we take more and more loans that we pay off for a long time including high interest rates.
A consolidation loan gives you the option of “credit holidays”, we do not have to worry about a few different installments each month, but only about one loan concluded on relatively favorable terms. The very need to consolidate loans is, however, an extreme situation which is prompted by exceptionally unfavorable circumstances, which it is better not to achieve. Definitely every decision to take a loan should be carefully thought out.