Affordable home purchase loan – Does it really exist?
The loan is the form of financing that is considered “discounted” and almost mandatory to be able to purchase a property also for residential use. However it cannot escape the fact that all the big banks, and even the Government agency, have some home purchase loans in their lending section. In fact, in fact, you are not obliged to request a mortgage to buy your own home, indeed, in some cases, the loan is the only way forward.
Let’s see what are the situations in which it is more convenient to request a home purchase loan instead of a mortgage, considering for the latter type the ” mortgage or land loan ” (with the exclusion of the unsecured loan which is in fact a simple loan of average duration – long because of the lack of mortgage registration).
When do I have to apply for loans instead of a mortgage?
The granting of a mortgage requires the possession of a series of requirements, which must also be possessed by the property on which the mortgage will be placed. Among the necessary requirements is the regularity of all building permits and of any type of authorization aimed at making the property compliant.
Attention: if you want to buy a property that also has minimal irregularities, to get the mortgage you should first eliminate or remedy them, with costs that are sometimes quite high. In the case of a loan for the purchase of the house, this aspect is lost, so you can decide to regularize the small deficiencies even at a later time, obtaining immediately a discount from the seller who benefits from the corresponding savings.
Other situations where you can be forced to apply for a loan are when you have to ask for rather modest sums, considering that the loans for the purchase generally start from 30 thousand USD as the minimum sum (except the Viloan mortgage that starts from 5000 USD), or if you want to choose a very short duration (less than 5 or 10 years). This case also includes the case in which a percentage that cannot be financed is needed because it exceeds the percentages that the bank is willing to grant under the LTV. Obviously we need to assess the weight that the loss of benefits will have ( on taxes to be paid and on the tax front for the deduction of interest payable ) compared to the one that will be obtained with the realization of your purchase project that otherwise would risk disappearing.
Then there are the cases in which the type of property chosen cannot be financed by the opening of a mortgage as in the case of a structure that is at the beginning of the work (and therefore is not yet with a cadastral income), of a third house, of relevance, etc. Finally, there are also the categories that have the greatest difficulty in accessing a loan rather than a loan. In this context we find above all the protesters, who even if they exceeded their status, would hardly find a bank ready to grant a mortgage, while on a loan there could be greater flexibility.
When can you apply for a loan instead of a mortgage?
If you do not want to deal with the formalities related to the registration and subsequent cancellation of a mortgage, then the request for a home purchase loan is the easiest way to go. On the one hand it will save on the costs related to the notary’s fee, but on the other hand you will have to pay on average higher interest rates, so the benefits and disadvantages of both aspects must be compared with each other.
Until five years ago the requests for loans to buy a house were much more popular than those for mortgages, especially in the case of a judicial auction or by young people able to take advantage of “facilitated” conditions proposed by the Regions. Today the situation has changed as there has been the introduction of a series of access facilities as in the case of the house Plafond, and for the facilities through which the purchase from a judicial auction can also be financed by mortgage.
Do they receive more financing or mortgages?
The diatribe on the convenience of a loan compared to a mortgage (or vice-versa) still today does not find winners convinced either on one side or on the other. In fact in the final evaluation for the choice we cannot look at the strictly economic aspect alone, but we must also take into consideration the necessary amounts, the causes that can limit accessibility, and the flexibility with which we can manage the type of “practice” as a whole. The aspect that should not condition an important choice that must be maintained for a fairly long period of time is that of savings that can be achieved by not paying the notary ‘s fee and the mortgage tax (see Mortgage Loan ), as they may appear to be apparently high amounts, but which remain proportionate to the requested loan amount.
Looking only at the economic sphere, it seems all too evident that the mortgage (especially land loan) represents the apparently more convenient financing solution based on:
- lower average rates (thanks to reduced spreads at least for the first home);
- recovery of 19% of interest expense paid annually within the 4000 USD threshold;
- taxes due and taxes (or VAT) reduced.
However, it makes no sense to push for a mortgage request if overall the product chosen does not effectively keep other really convenient conditions taken as a whole, first of all the real sustainability and flexibility in management for the entire amortization plan.
Special terms and conditions: multi-year Government agency loans
If on the one hand mortgages offer lower rates, for some categories of workers the possibility of obtaining even favorable terms in the home purchase loan is alive and present, especially if one looks at the rates available on the free market of the banks’ offer. The most vivid case is that of the Government agency loans which, in their regulation, of the direct multi-year loans, provide precisely the specific case of the loans linked to the own home or for a child. In particular there are four possible hypotheses:
- home purchase loan for oneself or for the child;
- home renovation loan (not necessarily first home);
- second home purchase;
- purchase of a property from a public body.
For each case, the documentation proving the need for liquidity for which the loan is requested must be produced. Regardless of the purpose chosen, the rate will always be the base rate for long-term direct loans, which starts with a 3.5% Tan plus 0.5% as administrative expenses and the portion allocated to the risk provision (determined according to the Government agency tables).