Until recently, the purchase of a flat charged with a mortgage deterred both potential investors and banks that did not even want to hear about financing such transactions. Today, properties that have entered into a contractual or even a contractual mortgage do not raise such concerns anymore. And rightly so, because despite their appearances, their purchase is not particularly complicated, and at the same time does not generate any additional risk. What do you need to know to get a mortgage on an indebted property efficiently and safely? Check!
What is a mortgage?
In order to better understand the course and characteristics of purchasing a home loan for a loan, the first step is to become acquainted with the specificity of the mortgage establishment and repayment.
A mortgage is a limited property right that gives a creditor (eg a lender) security on real estate or other related rights (eg cooperative ownership right to premises or perpetual usufruct) in the event of default (eg credit).
It arises at the moment of making an entry in the land and mortgage register relevant to a given real estate, but expires upon the repayment of the whole liability. It also follows that the creditor has the right to satisfy his claims from the real estate, regardless of who is the owner at the time.
Contractual and compulsory mortgage – how do they differ?
Before you buy a property you are interested in, first of all, carefully read the records in the land and mortgage register maintained for her. You can find any mortgage entries in section IV KW. They indicate, among others, the amount and type of the mortgage, as well as the entity for which it was established.
The flat or house you want to buy does not have to be mortgaged because of a mortgage. The establishment of such a right in rem may also be accompanied by other types of loans or credits used by the current owner. It is a so-called contractual mortgage, and therefore one that is voluntary. It arises when the owner willingly accepts the burden of the property.
The mortgage may also be established for the benefit of eg the Tax Office, the Social Insurance Institution or a natural person. This, entered due to the existence of debts arising from public law liabilities or unpaid fines or alimony, is called a compulsory mortgage.
It is worth noting that the mortgage burden does not have to coincide with the value of the property! Imagine a situation that the owner of the apartment buys them for PLN 300,000. At the same time, his own contribution is PLN 100,000, and the rest is financed with a mortgage loan. In this case, the mortgage can be established up to 200% of the loan amount, which gives an amount of up to PLN 400,000.
Who repays the mortgage from the indebted estate?
Both the seller and the buyer can plot the mortgage. The former may do so before the conclusion of a notarial deed of sale agreement or by concluding a request to delete it in the notarial deed itself. On the other hand, the buyer deletes, submitting the relevant application to the land and mortgage court after the act is concluded, when he becomes the new owner of the property. In this situation, the part of the purchase price (the first part of the loan) is transferred to the total repayment of the loan (goes to the mortgagee). And the seller’s obligation is to settle the loan completely and obtain a certificate releasing the mortgage from the bank. The remaining amount of the loan to top up the purchase price goes to the seller’s account.
Deleting a mortgage
It follows the examination of the application in court. Usually this procedure takes several weeks from the moment of submitting documents. It happens that the waiting time is extended to several months. The order to delete the mortgage will be sent to the address indicated in the notarial deed.
Formalities with a credited purchase of a indebted flat
The future borrower should make sure that the contents of the certificate for the balance of outstanding loan, which he receives from the seller, the real estate. This document should contain the following information:
- Bank data,
- data of borrowers,
- loan balance,
- loan currency,
- account number to be repaid,
- payment for early repayment of the loan,
- promise to delete the mortgage after full repayment.
Other formalities and procedures related to applying for a mortgage will look the same as in “classic” cases. The bank will evaluate your creditworthiness and check the history of repayment of liabilities in BIK. It will also require the submission of personal documents and full documentation regarding the purchased property. You have to reckon with the fact that the whole process of buying a mortgaged flat takes a little longer than in the case of an unencumbered transaction.
Real estate loan with a compulsory mortgage
At present, some banks are also crediting the purchase of apartments secured by a compulsory mortgage. At the same time, the details of the loan granting process as well as the requirements set for the borrower differ depending on the financial institution. As a rule, banks stipulate that the decision on granting credit is made individually, but virtually all of them expect that the funds obtained in the first place will be used to repay the entire debt.
Besides, of course, the value of an apartment can not be lower than the size of the debt, and the mortgage securing the loan for the purchase of real estate must be in the first place in the land and mortgage register.
It is worth noting that a few years ago it looked completely different. When the transaction concerned a flat charged with a compulsory mortgage, the buyer had to pay all indebtedness out of his own pocket. Only later could he apply for a mortgage for the price of the flat after deducting his own contribution. Although this issue contributed to a significant reduction in the prices of this type of real estate, but due to the long and complicated purchase process, they did not enjoy much interest from potential buyers.
The main problems associated with the financing of the apartments being auctioned
Two important problems arise when lending apartments. The first involves the need to obtain the bank’s consent to transfer funds to the account of the seller before concluding the notarial deed. The second concerns the duration of all formalities. From the day you win the auction, you have only 14 calendar days to pay the entire amount to the account of the vendor. This means that the entire loan process can not take more than two weeks. Therefore, if you only know when exactly the auction of the flat you want is going to take place, you should go to the bank just before this date in order to obtain a preliminary credit decision. Before the auction you can also order an independent appraiser to assess the property and prepare a set of financial documents.
Purchase a step-by-step flat for a flat loan
The loaned purchase of an apartment from the auction, of course, has its own specificity. His process looks like this:
- Credit application analysis. It can be carried out on the basis of the statement on your part, before the bailiff’s bidding. In this case, the bank, when determining the value of the loan, will take into account the real amount for which you will be ready to bid the flat. The technical and legal documentation and the content of the bidding announcement will have to be attached to the application.
- Issuing a credit decision. It should be remembered that the bank has 21 days to issue a decision, so the application should be accompanied by the consent to issue a decision before the expiry of the above-mentioned deadline.
- Possible signing of the loan agreement.
- Payment of funds to the account specified in the valid order of the so-called przybiciu. The receipt is the final approval of the highest bid submitted during the real estate auction.
- The borrower, after receiving the funds, provides a legally binding decision on the so-called assignment of ownership (confirms the transfer of ownership to the buyer).
There is another way – for more affluent borrowers. It involves refinancing the costs incurred. If you acquire real estate within the last 12 months with own funds, you can apply for refinancing the costs incurred for housing purposes. Thanks to such a solution, you will acquire a property relatively quickly and without any problems, and then you will regain (of course only part of the capital) with the help of the above-mentioned mechanism. Importantly, such a loan is concluded on the same terms as the mortgage.
What else is worth remembering?
It happens that despite the mortgage entered in the land and mortgage register, the claim may not actually encumber the property. This situation occurs when the owner of the flat has already paid off the debt, but he did not complete the formalities in the form of deleting the mortgage. In this case, it is enough that the current or new owner of the property submits an appropriate application to the land and mortgage register court. Therefore, before starting any credit-related activities, make sure that the entry in KW certainly concerns still existing debt.