Non-business loans: real estate loans

Sawatdee cautious man! Bom dia wise woman! It will be to your advantage to acquire a good financial education. Along the way, you'll understand. You'll avoid traps and seize opportunities. "The prudent man sees evil and takes cover, but those who lack experience go ahead and suffer the consequences." Proverbs 22:3, Segond 21)

1. Loan, Borrowing, Credit

2. Home loans

" The rich rule over the poor, and he who borrows is slave to him who lends." (Proverbs 22:7, Segond 21)

"Do not be among those who make commitments, who vouch for debts: if you don't have enough to pay, why would you want the bed you lie on to be taken away? "(Proverbs 22:26-27, Segond 21)

 1. Loan, Borrowing, Credit

The words credit and loan are increasingly used as synonyms. Initially, this was not the case. Yet they are two different financial products. In accounting, loans are long-term financial debts, while credits are medium- and short-term debts. In finance, a loan is an act whereby a bank or financial institution advances funds. It can also refer to the time allowed for repayment or the amount of the advance. Bank loans fall into two categories: property loans and consumer credit.

To lend is to entrust something to someone who must then return it.  In finance, it means handing over funds to a beneficiary (the borrower) in exchange for the payment of interest and a commitment to repay the sum lent.

A loan is a debt contracted with conditions fixed in advance (duration, interest rate, repayment terms). A loan can be granted by any natural or legal person (government, company, association). A bank loan is a loan contracted with a banking institution (bank, neobank (mobile bank), microfinance institution). The borrower is the person who requests or receives a loan. The lender is the one who grants or gives the loan.

2. Home loans

Real estate loans are used to :

• Buying land,

• Buying or building real estate,

• Financing work on real estate (renovation, repair, conversion).

• Buying shares in a real estate investment trust

The list of work that can be financed by a home loan varies from country to country. Repayment of home loans can be spread over decades, up to 30 years for an individual.

Classic mortgages are :

• Amortizable loan: Repaid in monthly instalments corresponding to a proportion of the borrowed capital and interest. Monthly payments may be fixed or variable.

• The bullet loan: 100% of the monthly payments are made up of interest on the loan. The initial capital is repaid at the last payment.

  
  

• The bridging loan: this is an advance on the sale of property A to finance the purchase of a new property B (until property A is sold and paid for).

There are also accommodating home loans (find out about the specific list and conditions in your country). For example:

• Loans with mortgage (classic mortgage): Banks may require a guarantee (mortgage) to protect themselves against the risk of non-repayment. In the event of non-repayment, the bank can foreclose on the property and sell it for repayment.  A mortgage is a piece of real estate.  The classic mortgage should not be confused with the mortgage life loan (consumer loan).

• Life mortgage (I strongly advise against this): this is a consumer loan taken out to finance a personal project. It gives you access to a sum of money by using the value of your property as collateral. If the borrower is unable to repay or dies, the lender sells the property to pay off the loan. In the event of the borrower's death, if the value of the property exceeds the debt, the excess will revert to the heirs.   The sum borrowed can be used to finance any type of project: buying a new car, taking a trip, providing financial assistance for children or paying for a stay in a retirement home.
  

• The zero-rate loan (en french PTZ, prêt à taux zéro): This is an interest-free loan, granted subject to conditions (resources, geographical area, number of occupants, etc.). It serves as a lever to facilitate the purchase of a principal residence by people on modest incomes. It cannot be used to finance the entire purchase of a property.

• The social accession loan, in french prêt d'aide à l'accession or prêt d'accession sociale (PAS).  In France, it's also known as a prêt action logement, prêt employeur or prêt patronal.  It is granted subject to certain conditions, notably income (low or average income), geographical area, property seller or builder in the case of new housing, and sector of activity.

• Lease purchase: Exclusively for the purchase of property as a principal residence. The properties concerned may already exist, or be under construction. These include mixed-use buildings, apartment buildings, apartments and houses.

  • During a period of enjoyment, the buyer is both tenant and co-owner. He or she pays the owner-seller a fee in the form of rent and savings. 

  • During the period of enjoyment, he can decide to exercise the purchase option, become the owner of the property and pay the balance. To finance the purchase of the property, he can apply for a mortgage from a bank. You may decide not to purchase the property. The seller will return the sum advanced, less an indemnity. If, on the other hand, it is the seller who cancels the contract and thus the sale of the property, he will have to return the acquisitive share and pay an indemnity to the tenant.

• Conventional loans: country-specific features. Generally speaking, these are loans on very advantageous terms, granted exclusively under certain conditions, by banks that have signed agreements with the government.

• The home savings loan: The prêt épargne logement loan is available after a compulsory minimum savings period for financing a primary residence. In France, it is available only to holders of a Plan Épargne Logement (PEL) and/or a Compte Épagne Logement (CEL).

** Sawatdee (pronounced sa-wa-di) = Hello in Thai

**  Bom dia = Good morning in Portuguese