What Are Mortgages and How Do They Work?

The mortgages are one of the most used forms of guarantee. They serve to guarantee the debtor’s obligations to the creditor or a property of his own heritage, specially designated for this purpose by operation of the law (land, buildings, houses and apartments).

How It Works

The loan accepted as collateral is a conventional mortgage that is established by agreement between the bank and the owner/owners of the property pledged as collateral. It is materialised through an agreement, which is an ancillary to the credit agreement.

The payment guarantee is that if the debtor does not reimburse the loan rates and obligations related, the lender (in favour of which the mortgage was incorporated) may require the sale of the asset and from the proceeds to cover the debt.

Even if you get a real assessment of the property, unexpected events can change the value of the guarantees in an unwanted way. To avoid losses that may result from the occurrence of unanticipated events, the assets are insured at an insurance company and insurance policy is endorsed to order the lending bank.

After full payment of the debt resulting from contracts of credit, the guarantee is entitled to request the bank consent of removal (deleting) of the record. The bank issues a letter to the Office of Cadastre and Real Estate Publicity, confirming full payment of the debt and agrees to delist mortgage.

Importance of the Rank

In case supplemental credit to the borrower or new loans were granted or if the property value is covering the side for the credit supplements, respectively for the new loan, the bank will sign a new contract for the mortgage on the building, which will receive entry to the land of the previous junior mortgage constituted in favour of the bank (class II or III).

The bank may accept the warranty and property affected by the debts in favour of another bank, according to the takeover of credit granted by lending it to the bank. The importance of the rank of the mortgage is that between the two banks, lending of different rank, the senior, that scored the first mortgage, will have the right to fully indemnify the price of the property and other creditors will indemnify of what will remain.

The Loan

The mortgage loan is a loan granted by the bank to individuals for major purchase, construction, renovation of housing, buying land or refinancing loans with the same destination (mortgage) contracted from other banks.

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