When purchasing a home, it is normal to go to a banking institution to obtain the financing to complete the operation. At the time of doing so, we have two options, the mortgage loan and the mortgage loan.
In the real estate market, the most common thing is to contract a mortgage loan with the bank, however one option we have is with the mortgage loan, which also fulfills the function of financing the purchase of the house, but with different terms than the loan .
Mortgage loan
The financial institution lends a certain amount of money to the person in exchange for placing the property itself as a payment guarantee, constituting a mortgage on it. Thus, the loan holder must repay the borrowed capital, facing a series of interests. In the event of non-payment, the bank may execute the mortgage on the property.
The mortgage loan is usually the most common option in the market to finance the acquisition of the house.
Financial entities offer a wide variety of mortgages: with and without links, at a fixed or variable rate, with a 10, 20 or 30-year amortization; etc.
Mortgage credit
In the case of mortgage credit, the bank offers the applicant an amount of money, which he must return with the interest generated periodically and also offers the house as a guarantee of the operation.
The main differences in credit with respect to mortgage loans resides in:
- The holder can make use of all or part of the credit.
- As the person repays the principal, he can have more money until he reaches the original credit limit.
However, experts recommend being prudent and taking out mortgage credit when we have certain financial knowledge, to avoid over-indebtedness.
Home loan vs home equity loan
The decision to contract a mortgage loan or a mortgage loan depends a lot on the needs and circumstances of each person. First of all, we must know well the differences between the two options regarding these aspects:
Interests
Regarding the payment of interest, in the case of the mortgage loan we will pay interest for the entire debt that we have contracted with the bank, while if we are facing a mortgage loan, we pay interest for the amount that we have available: if not we reached the established limit, we will not pay interest for the remainder. On the other hand, it is also convenient to take into account that the interest rates that you will pay for the mortgage loan are usually higher.
Surrogacy
The case of subrogation is a factor to take into account when opting for a loan or a mortgage loan, since although it is theoretically possible to carry out subrogation of a mortgage loan, it is not very frequent that banks are willing to accept this request, so that you will most likely have to sign a new contract, canceling the credit.
This procedure is usually easier in the case of mortgage loans, so that we have the possibility of making a creditor subrogation, transferring the mortgage to a different entity; or debtor, replacing the mortgage holder with another person.
Term
Regarding the term, the mortgage loan has the advantage of being more flexible if we are faced with the need to request an extension of the maturity or a postponement in the payment of installments, also known as the grace period.
Have more money
Another important difference between these two figures is that, in the case of mortgage credit, it contemplates the possibility of having more or less money without having to modify the contract. This does not happen in the case of the mortgage loan, since a modification regarding the amount of the same would imply a variation in the contract that has been signed, better known as a novation of the mortgage.
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