Very often, when we say that we are trying to get a housing loan, we are actually talking about a mortgage. These two concepts are confusing to us and that’s why we use them interchangeably, at last we want to buy a flat, so we take out a housing loan. However, it is worthwhile to broaden our knowledge of both banking products, as this may allow us to choose a more advantageous solution in our situation.
What is a housing loan?
Housing loan is a bank product that is granted exclusively for the purpose of buying a house, flat or garage, or buying a communal flat. In this case, the security is a mortgage, i.e. an entry in the land and mortgage register, which states that if the loan repayment is discontinued, the bank has the right to take over the property. This is probably the reason why housing loans are so often confused with mortgages. Moreover, money from a housing loan is not transferred to the borrower, but goes directly into the hands of the developer or the person selling the apartment. You can read more about housing loans in the text on which you can find out more about this product.
Mortgage loan – what is it?
A mortgage loan, like a housing loan, is usually granted for purposes such as buying a house or flat, but not only. Very often such financial commitments are made in order to expand or rebuild a property, carry out repairs or even repay another loan. In fact, there are many possibilities here, banks often provide this kind of financial assistance to customers in very different life situations.
Another similarity between a housing loan and a mortgage is that the collateral is real estate. If we take out a loan to buy a house, for example, then if we become insolvent, the bank has the right to take over our house, auction it and thus cover the losses incurred in connection with the outstanding loan. In short, the term “mortgage” is very often used to refer to all loans for which a mortgage is established on a property, even if they are for any purpose.
Which credit should I choose?
In fact, there is little difference between a mortgage and a housing loan when you want to buy a flat. This means that it doesn’t really matter which loan you choose, and you will still have to make an entry in the Land and Mortgage Register, pay monthly installments, the amount of which will depend on the bank’s offer you decide to make. Faced with such a choice, we should ask ourselves whether we need money only to buy a flat, or whether we would like to renovate and furnish it? If we have such needs, it may turn out that a better solution will be a mortgage loan, which will not go directly to the hands of the real estate seller, but to ours and we will be able to dispose of it more freely than in the case of a housing loan.