Misconceptions and myths about mortgages

Today, many people can apply for a loan. Almost all financial institutions in the country are involved in such long-term lending transactions. The development of mortgage lending was largely facilitated by the state itself, because thanks to this, many citizens ‘ questions concerning real estate were resolved by themselves. Despite the development of mortgage lending, there are still some misconceptions and myths that get in the way of a person getting a loan to buy real estate or are the cause of problems after the mortgage is issued.

Mortgage: A loan for the wealthy

To date, this misconception is the most common. In reality, such credit programs are designed for people with slightly higher than average income. There are mortgage programs that are available to ordinary citizens, as they are concluded for a maximum period of 30 years, and therefore the monthly payment is relatively small.

Mortgages from realtors

Specialists who work in real estate agencies often have to explain to people that mortgage loans are not issued by the company itself. The realty company is engaged only in the provision of intermediary services in finding a suitable property, the collection of documents for mortgages, etc.

Mortgage real estate will be the property of the lender

Many people still believe that when making a loan transaction, real estate becomes the property of a financial organization and remains so until the borrower fully pays his debt under the loan agreement. This myth arose because people do not understand the concept of “collateral”. In a mortgage loan transaction, the purchased property becomes collateral, which means that the buyer of this object will be somewhat limited in actions, but the property will be registered as his property.

An unfinished apartment will become a pledge

Today, quite common are transactions when a mortgage is issued for real estate that is under construction. Potential borrowers assume that in this case the bank will take the unfinished object as collateral, and this opinion is erroneous. In this case, the mortgage can only be secured against another real estate that is the property of the borrower. It should be remembered that housing under construction can not be a pledge, because it can not be issued ownership rights.

Mortgage debts will be forgiven in the event of bank bankruptcy

This is a very big misconception that has caused a lot of problems for some borrowers. Banking organizations that become bankrupt are no longer licensed, meaning they can no longer open deposit accounts, issue loans, or engage in other operations. At the same time, they are obliged to pay off depositors and continue to accept credit payments.

Insurance will cover everything

When entering into a mortgage transaction, a person has to take out several insurance policies. Not all of them are mandatory, but credit specialists persuade borrowers of the need for each of them. As a result, many mortgage borrowers agree to take out insurance in the hope that they can become reliable protection from any troubles. At the same time, few people look at the terms of insurance when signing a contract.

The refusal of the insurer to pay compensation due to the fact that the incident does not belong to the number of insurance and the person needs to pay their own debts, turns out to be a big surprise.