The common language is fairly generous in terms of terms, so it often happens that the types of credit that can be used for specific purposes are confused . For example , a home loan can be used for house purchase, housing expansion, home renovation or home modernization . If you want to get a loan for this purpose, be sure to look carefully at what the loan you choose can be used to avoid any surprise.
A home loan is a tied loan
In general, the marketing communications strategy of the banks decides how they offer their loans for different housing purposes. There are several different products for specific purposes (eg home improvement loan). Elsewhere, there is a loan where the purpose of the home is indicated and the specific options are listed, but the same product is recommended for each possible use.
There is a product that even states that it can only be used for new or second-hand real estate ;
Interest-free loans generally have higher interest rates – since uncontrolled use is always more risky for the bank – so if we succeed in finding a targeted loan that can cover our plans, it is better to choose the latter.
Home loans can be state-supported and have a market interest rate
Currently, the state supports loans for the construction of new homes and the modernization of real estate . There is a housing loan used for home use that reduces the interest rate in the first years of repayment . In many cases, state-subsidized loans can be achieved under strict conditions (age of the claimant, number of children, number of property owned or other loans, etc.), and generally the amount of the loan and the property to be financed is maximized.
Interest rates on market-rate loans are adjusted to the central bank base rate . (Of course, the interest rate also depends on the repayment part of the borrower, the maturity and many other things.) When choosing between the two types, it is worthwhile to proceed with caution , because if the market interest rates are low, it is better to use more freely and more easily. to choose from available market credits than from those with strict state aid.
Home loans are mortgage-type loans
In the case of mortgage-type loans, the collateral is secured by real estate . The bank acquires a mortgage on the property (s) , which means that the owner is free to use it, but if he does not fulfill his obligations under the contract, the bank has the right to sell the mortgaged property.
There are a number of products on the home loan market in terms of whether the mortgage is registered for the property and / or other property you want to buy, and for how many properties you accept as collateral.