Author: Megan A. Lloyd
The mortgage credit is a contract whereby a bank or financial company, called the creditor, gives money to a client, owner or credited, whose interest is generally a property. Unlike a mortgage loan where the money is withdrawn at once, in the mortgage credit is to use the capital in small quantities, as needed.
As in other loans and credit loans are fixed rate, variable or mixed. In the first case, the interest rate is fixed in the loan contract and remains constant throughout the life of the loan. You know how much you pay each month, regardless of market rates vary. In the case of variable interest, provides a value called differential (which is constant) on a reference value, which in Europe is the Euribor and the United States (for example), is determined by the Federal Reserve. Because these reference values are adjusted constantly, so will the interest rate. Finally, the joint interest is a combination of both, meaning that is fixed for a certain period can be several years and then become adjustable.
Whatever interest rate you choose for your mortgage, also vary with respect to mortgage loan because it pays interest on the entire debt, while in that interest is calculated as the amount of money has been withdrawn.
However, they have in common form of return of borrowed capital, usually in monthly installments over long periods of time (usually years) and the destination will be given to them, which can range from buying or building home renovations or repairs to it.
After the U.S. housing crisis in 2007, called “the big crunch”, the supply of home loans had declined worldwide. However, despite the global economic crisis in many countries this situation has begun to reverse. However, for the same reason, financial institutions have become reluctant to grant this type of credit and therefore have further increased the requirements for access.
Moreover, this situation has also affected interest rates, which have been expensive to 5 percentage points compared to the fees charged by 2007, which has determined that substantial reduction in the number of people can access this loan.
We must also consider the loss of ability to pay workers who have suffered from the depreciation of the dollar and other currencies, leading to reduced purchasing power and an increase in the difference between wages and housing values, reinforcing above.
If the borrower falls behind in payments, the lender has the right to appeal to a judge and demand the closing of the property to recover the lost capital.
Borrowers should ask lenders much information as possible about the mortgage loan offers in order to compare the options at the market and choosing the one that best fits your margin payment with the best interests and according to payment behavior.
As an alternative, many organizations have chosen to grant loans to finance repairs and purchases of small units with payment periods that can range from 5 to 10 years instead of the traditional 30 to purchase mortgage, but the interest rate can reach almost 20%.
In Europe, we are trying to establish a mortgage credit system similar in all countries of the European Economic Community, given its particular political and economic situation, in which several countries share a currency, borders and political and legal entities (such as parliament). This lack (relative) boundaries has suggested that these countries implement similar requirements when applying for these credits, which would have other benefits, such as a European credit market, removing barriers to the mortgage supply and demand. However, for the moment, the agreement in this regard seems distant.
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Posted in Credit Banking | Tags: Bank, credit, credit loans, credit market, Debt, financial, financial company, home loans, Loan, money, mortgage credit, payments