Pursuant to the Civil Code, property mortgage means the use of property by one party under its ownership (hereinafter referred to as the mortgagor) to secure the performance of an obligation without handing over the property to the other party (hereinafter referred to as the mortgagee). Mortgaging property to secure a loan often contains many risks that not everyone knows.
The following article will analyze some key points to keep in mind when mortgaging property:
1. CLEARLY DEFINE YOUR OWN NEEDS:
- Most mortgage loans are usually consumer loans, loans to buy real estate, cars. Defining the loan purpose will help the mortgagor plan a detailed plan for repayment.
- If you apply for a loan to buy real estate, you need to determine whether the price of the real estate you buy is likely to increase in the future or not. If the price does not increase, the mortgagor not only has to bear a mortgage debt, but also suffers losses due to bad investment.
2. SELECT THE MORTGAGEE:
- Choosing a mortgagee is also an issue that the mortgagor needs to consider carefully. Mortgagors can consider the reputation, interest rate, term, interest payment method, promotions, incentives of the mortgagee as well as the mortgage conditions set by the mortgagee to get yourself a suitable mortgagee.
3. LOOK CAREFULLY AT THE LOAN CONTRACT:
Mortgagors usually have the mindset that they have to take out a loan sooner or later, so they just skim and sign the contract to get money quickly. However, they forget that the property they use as collateral is allowed by law to be used for a variety of loans, as long as the collateral value of the property is sufficient for all the loans that the mortgagors have. Therefore, there are many cases when mortgagors coincidentally take legal risk due to the following wording of the agreement: “This property is used as security for but not limited to the obligations specified in Article…”
4. PREFERENTIAL PERIOD:
- Depending on the income and loan amount, the mortgagor should carefully consider the most appropriate loan term. An equally important issue that you need to pay attention to is the preferential interest rate period. Many people who are attracted to a 10,000 billion home loan package with an interest rate of 5% per year do not know that this preferential interest rate only lasts for a certain period of time. After that, it will be changed by amplitude (usually calculated as the deposit interest rate at the time of change plus a fixed number). This leads to the case when the interest rate after the preferential period may increase to a high level that the mortgagor does not anticipate, failures in the repayment plan.
The above is an article of PL & Partners about Things to keep in mind when mortgaging property. If you are having trouble finding out about mortgage-related issues as well as other legal issues, please do not hesitate to contact us for advice and support.
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The article is based on the current legal regulations at the time of writing, and it may no longer be valid or relevant at the time you are reading it due to changes of the law. The article, therefore, is seen as reference only.