How does a home mortgage work?

by Admin | May 4, 2021
How does a home mortgage work?

The mortgages of a house in the US consist of receiving a certain amount of money under the condition of a loan from a banking entity, for the acquisition or reformation of a real estate property. But the truth is that the policies of a mortgage are a little more complex. That is why we will break down the subject in several steps that will make you understand how a home mortgage works.

How does a home mortgage work?

A home mortgage can be applied for different purposes such as:

Acquisition of a new, in-use or even pre-sale property.
Acquisition of a piece of land (must be private property).
Construction of a property.
Extending or renovating a property you own.
Loan with free use of funds, that is to say, only to obtain cash flow.


How much money can you get?
The first thing you should know is that a mortgage works only with a guarantee. The banking entities the condition this type of negotiations, to the offer of the same property as a guarantee of the fulfillment of the agreed payment.

From there I will give you an idea of the amount of money you can get to get your accounts. With a mortgage you can request financing of up to 80% of the value of the property. To know the value of the property it is necessary to make an appraisal.

What is an appraisal?

An appraisal is the most accurate estimate of the commercial value of the property, reflected in monetary figures and performed through an impartial technical process. In an appraisal, the physical characteristics of the property, the use, the urban conditions are analyzed; all this is calculated based on a market study.


In other words, if the property has a value of $100,000, you can obtain $80,000, and you will have to contribute the remaining amount.

Interest on a mortgage

Surely you have wondered what benefit the banks obtain. The interests are the economic benefit that they obtain after financing you and there are several types:

Fixed interest: as its name suggests, this is a type of credit where the interest rate does not change and is established from the moment the application is made.

Variable interest: The rate may vary each year depending on the economic situation.

Mixed interest: In this type of credit, fixed and variable interest are combined, then an amount is established depending on the applicant's interests.


How long do you have to pay a mortgage for?

Most financial institutions offer periods between 10 and 30 years to pay. This period is calculated according to the client's payment capacity. For example, the maximum period is granted to those clients who have declared a minimum payment capacity, so the institution lengthens the time to adjust the monthly installments plus interest to this capacity.

But of course, the longer the repayment period, the higher the interest you will have to pay.

The whole process of a mortgage works practically the same way in almost all banking institutions in Colombia. If you need financial assistance through a mortgage, choose the most reputable banks in order to make your project a reality.

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