Used apartment – easier loan?
Loans for secondary housing are the most popular type of loan. It allows the purchase of residential or commercial premises that have already been used. Premises already built, with regulated legal situation.
It is these factors that make the conditions for borrowers buying on the secondary market different from those for supporters of developer housing.
The number of documents required when applying for a loan for a used apartment is much smaller than in the case of a development property. The most important feature of a used flat is that it already has a regulated legal status. What does it mean? That he has a land and mortgage register and meets the conditions for independence of the premises. It is an apartment that someone had previously used and paid for utility bills and rent. When applying for this type of loan, the bank actually requires only three documents: an excerpt from the land and mortgage register, the basis for the purchase of the premises by the seller, and a preliminary purchase contract.
One, two, three, or a set of documents
Land and Mortgage Register is the most important document. From it, each bank finds out who the current owner of the premises is, how the property is marked (address, area, number of rooms), whether a third person (personal servitude) is not allowed to live in the apartment, and whether there is no mortgage on the property. The basis of the purchase is often a document questioned by the sellers. Real estate owners are wondering why banks require it, since all the necessary information is already included in KS. However, it turns out that not all. For example: an apartment may be granted by a court when dividing property and oblige the person who has been involved to pay additional fees. If this person has not complied with the obligation imposed by the court, there is a risk that it is on this property that someone will want to secure their claims. Most often, however, the basis for the purchase of a premises will be a notarial deed concluded between the seller and the previous owner. The last document is the preliminary contract. It does not have to be in the form of a notarial deed, as when buying from a developer. It may have a civil law form and be handwritten. Of course, it is always better to sign a preliminary contract with a notary public, because it is easier to enforce in case of any complications.
Insurance – shorter, but with an addition
The credit terms for a used flat usually do not differ significantly from the requirements for a real estate development. Margins, lending period and insurance are in the same tables, without distinguishing by type of premises. The most striking difference concerns insurance until it is entered in the land and mortgage register. It is not about costs (although it happens that they are higher for the primary market), but about the period of paying the insurance. As the basis for the collateral for the loan is the real estate KS bank, from the payment of the loan to the actual and final entry by the land and mortgage court, the borrower must pay for insurance. This is usually the cost of the margin increased by about 1-1.5%. Translating interest into real money, with a loan of $ 350,000 for 30 years, an additional $ 230-350 more per month. With a used flat, the waiting period for entry in the land and mortgage register is 2-6 months, with a flat from a developer – even several years. Why this difference? The developer can settle the KS only after building the property. Insurance up to the time of being included in KS is not the end of prevention against a used flat. Premises from the secondary market must be insured immediately in the event of fire and random events. There is no such obligation in the case of real estate bought from the developer. However, the cost of such insurance is not high and amounts to about $ 280 a year (for premises worth $ 350,000).
Without a grace period or tranche
It is also worth noting that banks at premises from developers are more likely to extend the grace period, i.e. time to pay interest, than at the occasion of used apartments. Buyers of premises from the secondary market actually have no chance. The issue of payments in tranches is similar. With a used premises, payment is always made once, with real estate from the primary market the loan can be divided into parts. The money on the account of the person who sells the used apartment will be only after signing the notarial deed, i.e. after formalizing the transaction (the seller must believe that the bank will transfer money to him). If you buy from a developer, the bank will send money before signing the notarial deed. When it comes to loans for used premises, banks will also more often require a property valuation. Interestingly, typically mortgage banks do not grant loans for development housing, dealing only with the secondary market. So it can be said that buying a used property gives you the chance to have a greater choice among financial offers.