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Mortgage Loan: Life annuity, for Liquidity or First House

Eric Amato 0

The Mortgage Loan is a form of financing that is made for the purchase of a property where just as a guarantee to finance is the house itself. When we talk about a mortgage, generally, even if not always, we are talking about a mortgage loan. And that is why it is possible to have subsidized interest rates compared to all forms of financing.

Precisely because the Bank (creditor) will have as a guarantee on the part of the debtor (borrower), not only the salary, but the mortgage that obviously protects it in case of insolvency on the part of the debtor. A mortgage allows the bank to be the first subject to be used against the insolvent debtor, in the event that the mortgage is of first instance.

The mortgage has an entry higher than the value of the mortgage

Normally a bank records a mortgage of around 150% on the mortgage but also 200% of the value of the loan provided. This is because in case of sale of the property, due to insolvency of the debtor, the Bank will be entitled to recover a greater percentage than the amount financed. Let’s take a concrete example. We enter into a contract for a mortgage loan, with a rate obviously facilitated, for example, 1.3% per year for a value of 100,000

This is the value of the mortgage, but not the value of the home. Recall that a mortgage is almost never provided with a value of more than 80% of the value of the house we go to buy. In the case it was 80% of course, the registration of the loan could not exceed 125% of the loan itself. Normally, however, mortgages are 50%, 60% of the value of the property allowing the Bank to register a mortgage on the entire value of the property despite the fact that the loan was less.

This is possible to allow the creditor (Bank) to re-issue all costs incurred, including legal, for the debts’ failure to make payments. Also also in the face of compensation for the years of missed payments and to cover the rate of inflation.

Article 39 of the Consolidated Banking Act actually provides for an automatic indexing mechanism for the mortgage. This should ensure that mortgages do not exceed 120% of the amount paid. In recent years, however, thanks to inflation, the banks have managed to obtain registrations for mortgages up to 200%. These concessions would however be a moment to be reviewed, given that in 2015 inflation reached its historical minimum in Italy from 1959, 0.1%. In 2016 we can even speak of deflation. Such high percentages on mortgages are additional expenses for the client, as the notary fees for recording the same are calculated as a percentage based on the value of the mortgage and not the loan.

Another sore point is the duration of the mortgage. The notary contract of the mortgage registration has a twenty-year duration, but hardly any mortgages have a duration equal to or less than twenty years, in fact they are almost all higher. This means that after twenty years it is necessary to make a new registration. Therefore there will be other expenses that are probably useless but conspicuous for the debtor.

I considered them useless because if the debtor has reached the renewal of the mortgage, it means that he has paid twenty years of installments, and if he has not had problems in payments to date, it is supposed and hopes that it will not have them in the future. For a significantly lower duration. But this logical deduction certainly can not be a guarantee for a creditor (Bank) who therefore rightly calls for the renewal of the mortgage registration, with additional charges for the borrower.

The two biggest differences between loan or loan and mortgage loan are, that while the former can have a duration of no more than ten years, with a relatively low interest rate, the latter which obviously has the advantage of having a subsidized rate. and a duration that is between thirty and forty years, has a mortgage on the property of an amount of 150/200% of the value of the loan itself. With registration fees on the mortgage.

It is difficult to make evaluations or considerations in terms of economic convenience in this sector, since often it is not just factors such as interest, mortgages, etc… to enter into analysis but also the consideration of other parameters, such as the contractor’s salary of the mortgage, its possibilities of solvency and not to neglect his wishes. A situation that may be inadvisable under certain circumstances may instead be optimal with other basic parameters.