Real estate loan
Almost everyone buying real estate will need financing. It is done through a mortgage or real estate loan. Since the amount you will borrow is material, it is good to understand how it works.
Real estate cost a lot of money. No bank is willing to lend such big amounts without security for the loan. That is why the real estate loan was introduced.
When you apply and take out a real estate loan, the property is used as collateral for the loan. If you can’t service the loan the Bank can take the property, sell it and recoup the money.
That is why Banks are not willing to lend you as much as the property cost. They want a margin of safety. That margin varies depending on a host of factors. Regardless, you will have to pay a part of the purchase price upfront from your savings.
The mortgage or real estate loan is repaid to the Bank over a period of time. In addition you have to pay interest on the principal amount. Normally this is done every month.
You can either choose to have a fixed interest rate, and get a fixed interest loan, or choose to have market interest rates, which will give you an adjustable rate loan.
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