Nowadays buying a home almost always means taking on a mortgage to finance the purchase. How does this work?
The lending institution pays the seller, and the buyer has to return the money to the bank along with a certain interest. The bank makes sure the loan will be paid back by placing a mortgage on the home, which enables the bank to have your home sold off if you do not repay the loan promptly, so the bank can cover the debt with the price the home fetches on the market.
When looking for a mortgage to finance the purchase of your home, take these things into account:
The bank you apply to for the loan will first require you to have the home registered to your name. Generally the purchase agreement and the delivery of the loan (with the creation of the mortgage) happen at the same time, so when the seller and the buyer go to the notary to make their deed of sale, the bank representative goes too, to turn the money over to the seller when the deed is made.
Mortgage loan agreements are usually not negotiable, and they include general conditions, some of which may be abusive. Protect yourself and remember the terms of consumer and user protection legislation on this subject.
It may so happen that the home you are going to buy already carries a mortgage, made by the seller to finance his or her own purchase, or if the home is a new one, made by the promoter to finance construction. In these cases it is important for you to know that you are not obliged to take the seller’s place in (be subrogated to) the original mortgage loan. You may demand to have the seller cancel his or her mortgage, while you get a mortgage loan from another financial institution that offers you better terms.
If you are going to be subrogated to the loan the seller or promoter took, take these things into account:
You must demand a certificate from the seller, issued by the lending bank, showing how much of the loan remains outstanding.
You can ask the bank that holds the seller or promoter’s mortgage for a better interest rate and better terms. If they refuse, you can look into having another bank pay off the old mortgage and become your creditor under new, more advantageous terms. This sort of transaction is practically free of charge, because it is tax-free and the notarial and registration fees and the commissions the bank can charge for doing it are very low, by law.