Basic concepts of “mortgage”, “pledge” and their differences

Comparison of definitions

The first difference between a pledge agreement and a mortgage agreement is the legal meaning of these concepts.

The definition of bail was given in Part 1 of Art. 334 of the Civil Code of the Russian Federation (hereinafter referred to as the Civil Code of the Russian Federation). Having analyzed this norm, we can say that a pledge is one of the ways to secure an obligation.

According to Part 1 of Art. 1 of the Federal Law “On Mortgage (Pledge of Real Estate)” (hereinafter referred to as the Federal Law), a mortgage is a pledge of real estate, a way to purchase residential real estate by receiving a loan from a bank for a certain amount. It should be returned within 10-15 or even more years. For some categories of the population (teachers, military, doctors, young professionals), the state provides certain benefits for obtaining a mortgage loan. For many people, a mortgage is the most convenient way to become a property owner without having large funds at their disposal.

The concept of a mortgage is much narrower than the concept of a pledge.

Conclusions TheDifference.ru

1. A mortgage is a targeted loan, but a loan is not.
2. A mortgage, unlike a loan, involves pledging the purchased property as security for the transaction.
3. The interest rate on a mortgage is slightly lower than on a loan.
4. The term for which a mortgage loan is provided is usually several times longer than that of a loan.
5. A mortgage requires making a down payment, which can reach 30% of the home being purchased, but a loan does not have such a condition.
6. To get a mortgage, you need to insure not only yourself, but also your purchase, and to get a loan, you need to insure only yourself, or do without this condition altogether.

Subject of the agreement

The subject of the pledge in accordance with Part 1 of Art. 336 of the Civil Code of the Russian Federation can be almost any movable or immovable property, including cars, equipment, jewelry and even property rights to the above objects. Thus, the list of property that can be pledged is enormous.

According to the Federal Law “On Mortgage (Pledge of Real Estate)”, the loan received is secured by the property acquired in this way. If debt arises, the debt is collected by selling the mortgaged property.

The difference between a mortgage and real estate collateral

A loan secured by real estate is a non-targeted credit relationship. The money can be issued for use in any area, from running a business or purchasing another property to renovations or consumer spending. The only thing that is constant for such a loan is the collateral of real estate as a guarantor of money back.

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When it comes to large bank loans, the first associations are mortgages and loans secured by real estate. But are these concepts so identical as to put them on the same level? To understand the difference between a mortgage and a pledge, you need to look at these concepts in context.

Storage of pledged property

Since real estate taken on a mortgage is a way to secure a loan, there is an encumbrance on it. This means that without the written permission of the lender, it will not be possible to donate, sell, or even rent out the purchased apartment.

As for the collateral agreement, if you receive a loan, any valuable property, for example, a car or equipment, can ensure its payment. The property itself, for the purchase of which a loan was issued, may not be subject to encumbrances. The property may be held by the pledgor, pledgee, or deposited with a third party (Article 338 of the Civil Code of the Russian Federation).

The mortgage loan is always guaranteed by the property purchased under this agreement.

Differences between a loan secured by real estate and a mortgage

The first factor is important , since the bank usually gives large amounts as collateral, and you need to confirm a good stable income. Some borrowers are mistaken in thinking that if they have an apartment, then it is not necessary to have a large income, saying that the bank can sell my apartment in case of non-payment.

In this case, the bank will provide money for a loan secured by real estate, focusing on the value of the collateral. Typically, the maximum loan amount does not exceed 85-90% of the appraised value of the mortgaged property. That is, the loan amount is limited by the cost of your apartment or non-residential premises and the bank’s tariffs. But with a mortgage, your wishes are limited to the approved amount.

Requirements for the pledgor

The requirements for a potential mortgagor are minimal. Sometimes all that is required to draw up a contract is a passport and full legal capacity.

The requirements for a mortgagee, when the mortgagor is also the borrower, are much higher. Each bank sets its own framework for those who want to get a mortgage loan, but in any case there are a number of basic requirements:

• age. Mortgages are issued to people over 21 years of age. Each banking organization has its own upper limits, but in any case, the bank calculates so that the loan is fully repaid before retirement age. If the borrower wishes to take advantage of the preferential program, then the age limits are even stricter;
• income level. The potential borrower must have a high enough income to be able to pay the debt on the mortgage loan.

The requirements for the mortgagor-borrower to obtain a mortgage are more stringent than for registering a pledge.

Pledge agreement and mortgage agreement: registration procedure, difference

1. Clauses of the agreement that do not comply with the law.
2. The document was signed by incapacitated persons.
3. The signing of the agreement took place under pressure.
4. There is no information to identify the subject of the transaction.
5. The exact address where one of the parties to the agreement lives is not indicated.
6. There is no description of the size of the obligation.
7. The clauses in the contract do not have a precise meaning. They are interpreted differently.
8. At the time of signing the agreement, the legal entity did not have a license.
9. The head of the company went beyond his authority.

A pledge agreement requires state registration only in situations where real estate serves as collateral. It should be noted that the land area on which the property is located must also be registered, since it is transferred along with it.

The need for insurance

The need to obtain insurance for purchased real estate is provided for in Article 31 of the Federal Law. Without it, it is impossible to obtain a mortgage loan. In addition, banks often independently establish the requirement to insure the borrower’s life, health, and ability to work. The need to purchase such insurance policies is not provided for at the legislative level, but without them the bank may simply refuse to issue an agreement. Annual insurance payments are usually about 1.5% of the total value of the property.

To obtain a regular pledge, insurance is usually not required.

Insurance of the subject of the mortgage is provided for at the legislative level.

What is a mortgage?

A mortgage loan is a bank loan that is provided for the purpose of purchasing real estate. The purchased property itself becomes collateral for the mortgage. Accordingly, when applying for a mortgage loan, documents are drawn up on the transfer of housing as collateral to the bank, which imposes certain restrictions. Thus, the recipient of a mortgage without notifying the bank has no right:

• sell or exchange real estate;
• register new residents in the apartment.

Until the mortgage loan amount is fully repaid.

Despite the fact that mortgages have been in force in Belarus for quite a long time, in our country there is no established judicial practice on the seizure of apartments from debtors who are unable to pay off their obligations. Therefore, residents of the country often consider any bank loans for the purchase of real estate to be a mortgage. It is worth remembering that a housing loan secured by individuals is not a mortgage, the obligatory component of which is the security of the purchased living space.

What is a loan?

The concept of a loan agreement is enshrined in Article 819 of the Civil Code of the Russian Federation, according to this norm:

Under a loan agreement, a bank or other credit organization (lender) undertakes to provide funds (loan) to the borrower in the amount and on the terms stipulated by the agreement, and the borrower undertakes to return the amount of money received and pay interest for its use, as well as other payments provided for in the loan agreement, including those related to the provision of credit.

What is the difference between a loan and a mortgage?

The development of the banking sector has led to the fact that many banking products accompany the life of a modern person day after day: people actively use credit cards, receive salaries from banks, and pay utility bills. Most experts note that among the wide range of banking services, standard loans and mortgage lending have become the most in demand. However, not everyone knows the difference between a loan and a mortgage.

From an economic point of view, any mortgage, whether a mortgage by law or contract, is a loan where the borrower’s real estate serves as collateral. In most cases, a mortgage is taken out for the purpose of acquiring real estate by the borrower - an apartment, land, house, cottage, but in some cases the borrower has the right to use the loan funds received from the bank at his own discretion. The property pledged serves as a guarantee for the bank that the borrower will fulfill its obligations under the loan and, if the borrower does not fulfill them, the bank will have the right to sell the property pledged by the borrower.

These requirements may vary by region

Types of mortgage loans in 2020:

• ~ For the purchase of housing under construction
• ~ For the purchase of finished housing
• ~ For country real estate
• ~ For the construction of a residential building
• ~ Mortgage plus maternity capital
• ~ Military mortgage
• ~ Housing loan for refinancing
• ~ To the garage

Categories of citizens entitled to preferential mortgages:

• ~ housing area of ​​which is less than sanitary standards and legal norms
• ~ low-income families
• ~ employees of budgetary organizations with more than 3 years of experience
• ~ officers who entered into a contract after 2005 or served more than 3 years before 2005, as well as junior officers and sergeants serving under the 2nd contract.

Pledge and mortgage difference

The word mortgage originates from Ancient Greece from the name of special pillars ὑποθήκη

on the border of the borrower’s land plot, which translated from ancient Greek meant “support”, “stand”, with an inscription that said that this land secures the debt.
This method of ensuring the fulfillment of an obligation - through a pledge of land - was known back in Ancient Egypt, but the foundations of law were developed by the ancient Greeks, therefore mortgage in Roman law as a special type of pledge with the collateral remaining with the debtor began to be called the Greek word mortgage .
But not every pledge is a mortgage, since this requires the condition that the pledge be of a public nature. A mortgage is a pledge that requires the transaction to be registered with a special body that registers real estate transactions, as a result of which corresponding records will appear indicating that the property is encumbered with a pledge. After this, any interested person may request an extract from the State Register of Rights to Real Estate and Transactions with It. In this extract, if the property is mortgaged, it will be indicated that there is an encumbrance: a pledge.

The main differences between a mortgage and a home loan

1. A mortgage is issued only for the purchase of housing. In this case, the latter acts as collateral. Credit is provided for any purpose. A housing loan can be issued with or without collateral. The borrower's existing property can act as collateral.
2. To obtain a loan, it takes less time and a standard package of documents; fewer requirements are imposed on the borrower. Getting a mortgage approved is more difficult and takes longer, and requires a down payment and insurance for the duration of the debt repayment.
3. The interest rate on a mortgage is significantly lower than on a home loan. Repayment terms are longer, which allows you to pay off debt with less damage to the budget.
4. If the borrower for some reason is unable to repay the debt, according to the rules of mortgage lending, the home will be sold, and the proceeds will cover the debt to the bank. If we are talking about a home loan, then the housing remains the property of the borrower, but failure to repay the debt will lead to significant financial losses.
5. When purchasing a home using a loan, the borrower immediately becomes the owner. When applying for a mortgage, the property becomes a person’s property only after the debt to the bank is fully repaid.

When choosing, you can contact a lawyer or a bank employee who will explain in detail all the nuances of each real estate acquisition program. You need to study the relevant literature in order to know all the intricacies of applying for a loan from a bank. The main differences between the two types of lending are quite simple and understandable.