Housing loan and mortgage

A common practice among people who do not have work strictly related to the financial market is to use the terms home and mortgage interchangeably. In many cases, both terms may mean the same thing, but you must know that they are a different loan product only available at banks.

 

The housing loan is intended for the purchase of a flat or a house, or purchase of a communal flat, or the transformation of a cooperative tenant’s right to the property into ownership. On the other hand , apart from the above-mentioned purposes, the mortgage allows to cover the costs of purchasing a construction plot or modernizing the property.

 

Similarities and differences

Similarities and differences

The terms housing loan and mortgage loan in terms of construction and offer are usually very similar. The features combining both products are undoubtedly the long duration of the loan agreement, a similar level of interest, similar procedures and formal conditions to be met by the customer when applying for a loan. Check the offer of loans for the purchase of real estate. However, one should also mention the most important differences between these products. It is primarily a difference related to the purpose of lending. A mortgage can be used to a much broader extent than a housing loan, which has strictly specified purpose by the bank .

 

Housing loan for residential real estate only

Housing loan for residential real estate only

 

According to the concept of housing loan, it is granted for the purpose of purchasing residential real estate. It does not necessarily have to be a flat from the primary market, from a developer or a flat from the secondary market. A housing loan can be taken for the purchase of a single-family house, a summer house or the purchase of a communal apartment. Banks accept the purpose of granting this type of loan in the form of the transformation of the cooperative tenant right to a dwelling into ownership rights.

 

Purpose of the mortgage

Purpose of the mortgage

 

Unlike a home loan, you can use a mortgage to buy a residential property, but not only. There are additional possibilities to use the funds derived from it. This loan can be used for:

  • purchase of a construction plot,
  • building a house or flat,
  • renovation of a residential property,
  • building modernization,
  • modernization of the premises for rent or lease.

What should the consumer choose ?

What should the consumer choose ?

 

When analyzing bank offers, the potential borrower should first of all determine what he wants to take out the loan for. If it is a purchase of an apartment, then both a housing loan and a mortgage will be suitable for him. However, he will not be able to cover the costs of building a house or buying a construction plot with a home loan, and the mortgage will enable him to do so. Already at the stage of applying for such a commitment, banks require that the loan application specify the desirability of taking a loan.

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