In the banking sector, there are different types of lending, which, naturally, differ in the terms of the transaction. If we compare a simple loan and a mortgage, then they differ significantly from each other. Let's try to highlight the main characteristics of each of the types of loans, according to which these services can be divided into two different categories.
Mortgage represents a target loan, since it is issued only against the security of the acquired real estate. This means that although the borrower becomes the owner of the property, he transfers it to a temporary pledge to the bank as security for the transaction.
Loan is the simplest type of loan, since it is not targeted, that is, it can be obtained for any purpose not prohibited by law. At the same time, the bank does not receive any property as a pledge, since it simply may not exist.
In contrast to a loan, a mortgage is a targeted loan, since it is issued against the security of the acquired housing. As a rule, the size of a mortgage loan is much larger than the loan, and therefore the loan term is much more significant - 10, 15 and even 20 years. In addition, the mortgage involves making an initial payment for the purchased property, and in some banks it can reach 30% of the cost of an apartment.
In case of mortgage lending, a prerequisite for the transaction is life and health insurance of the borrower, as well as the directly acquired property, since it acts as a security for the operation being performed. When obtaining a loan, some banks, at their discretion, may not require insurance of the borrower, but the onset of a negative situation is compensated by the fact that a higher interest rate for the use of borrowed funds is applied for loan lending.
- Mortgage is a target loan, but a loan is not.
- A mortgage, in contrast to a loan, involves the pledge of the acquired real estate as security for the transaction.
- The interest rate on a mortgage is slightly lower than on a loan.
- The term for which a mortgage loan is granted is, as a rule, several times longer than that of a loan loan.
- A mortgage involves an initial payment, which can reach 30% of the purchased property, and the loan does not have such a condition.
- To obtain a mortgage, it is necessary to insure not only yourself, but also your purchase, and to obtain a loan - only yourself, or do without this condition altogether.