Until a few years, credit institutions were often not given quantities beyond 80% of the appraised value of the house we wanted to buy. But the rising cost of housing has produced more and more people need more than the 80%.
In addition, household saving has been declining, so that few people will have in their coffers with the remaining 20%. To which will be added expenses and taxes.
Although by definition have a mortgage as collateral property acquired with it, banks do not want to stay with homes of those unable to pay if they can avoid it. Your profit is in charge interest as long as possible. By law, mortgages of up to 80% of appraised value will not be affected by any other guarantee than the same property.
When asked for a loan in excess of 80% of the value of property valuation
But the circumstances before mentioned, many people are forced to order more than 80% of the appraised value, to meet housing payments and expenses associated with their purchase as well as furniture, appliances.
In these cases, institutions ask for a guarantor, to respond with their property (collateral) if the owner has not replied to credit payments. This means that you have to involve family or friends in an embarrassing situation for both. Also someone who buys a second home may be forced to underwrite the first such new purchase.
But there are people who have no previous possessions and have no relatives or trusted people in the country that serve as guarantors, even in situations of economic solvency. This makes a lot of people might not have access to homeownership, which banks also lost an important business niche.
Unsecured mortgages over 80% of the appraised value of the property to acquire
Thus, organizations can give no guarantee mortgages even if more than 80% of the appraised value of the property to acquire. In fact, usually up to and including 120% of that value.
In return, institutions require the client to take out insurance to cover non-payment of dues. Thus, monthly payments will consist of three added: principal, interest and insurance. This may adversely affect our future solvency level, because in exchange for not presenting guarantors we will face a significant increase in quotas for the amount of insurance. Therefore the repayment terms are large, up to 40 years, which makes payments more affordable and offset the rise in the cost of insurance. And that prolonged and makes the operation profitable for the institution.
But there is often no guarantee mortgages as specific products are widespread in all entities. Rather, individual cases are studied and their characteristics. Because even with insurance and property as collateral, banks granted loans only if they believe their client maintains a certain level of solvency.
For example, as a rule, do not grant mortgages with market shares exceeding 30% resulting from the customer’s monthly income. And taking into account other loans that may be paying (car, cards, etc.).. In addition, may impose certain conditions, such as the customer is official or permanent contract have a medium or large company, etc. If the conditions themselves to mortgages tend to be stricter in the case of mortgages with no guarantee was often more.
In any case, the usual practice of banks is to request (rather require) a guarantor for operations above 80% of the appraised value, rather than establish a mortgage guarantor but not guaranteed.