Second Mortgage Guide – Advantages And Disadvantages

The thing that interests the real estate buyers the most – is what exactly is a mortgage, how it is entered in the real estate cadastre, and whether it is possible to sell or buy a mortgage-laden apartment or a house. In this text, we will try to answer all these questions and explain everything you need to know about this lien institute as well as a second mortgage.

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What Is A Mortgage?

A mortgage is a real estate lien that empowers the creditor to collect its claim by selling the real estate – in case the borrower fails to pay the debt. When buying an apartment on a loan – a mortgage is a guarantee if the buyer is unable to repay the loan.

In these cases, the bank or agency will be able to sell the property and thus settle its claim. The property on which the mortgage is established remains the property of the buyer – so he may dispose of that property. So when you buy a home or an apartment and set up a mortgage on it – you can live, rent, and even sell it in that apartment.

How To Buy A Mortgaged Apartment?

Most buyers, when they hear that a home is mortgaged, soon quit buying. But there are several ways to safely buy a mortgaged apartment.

The Seller Can Clear The Mortgage

This can be done until the day the real estate contract is concluded. It can do this by settling its debt to the bank or agency as a whole. It is often the case that the seller pays off the mortgage-claim from the down payment received from the buyer after the real estate sale contract. When the seller clears the mortgage from the real estate cadastre, he provides the buyer with a real estate listing without encumbrances and notes, and then the main real estate sale contract can be concluded.

The Buyer Can Pay The Mortgage As Part Of The Price Of A Real Estate

Alternatively, the buyer of the real estate pays a portion of the agreed price directly to the bank or agency as a lender in the amount of its claim. In this case, before the conclusion of the real estate sale contract, the seller receives a letter of intent from the bank in which the bank undertakes to issue a mortgage waiver license after the settlement of the entire debt. After this payment, the seller is obliged to take all necessary steps in the bank to liquidate this debt, to obtain a license for deletion of the mortgage and to initiate the procedure for deleting it before the competent service.

We Do Not Recommend THIS Option

The third option is the most unfavorable for the customer and we do not recommend it accordingly. The buyer can pay the agreed price directly to the seller’s account, and the seller is obliged to pay the money in full to the bank. After that, the mortgage deletion procedure is the same. This option is not favorable to the buyer because the seller may fail to fulfill his obligation. The seller can fail to pay his debt to the bank – and the buyer acquires real estate that remains burdened. Therefore, the first two options are certainly safer and better.

What Is A Second Mortgage?

In line with the market requirements for further improvement of loan conditions – some of the conditions for securing the claims of banks and agencies that lend to clients have been changed. Specifically, that allows offering a second mortgage as security for a home loan. It can also allow borrowers who have offered a much more valuable property as a security – to borrow again.

What Does It Mean In Practise?

For example, a beneficiary who has already raised a home loan that establishes the first-class mortgage on a property with a significantly higher appraised value than the loan amount – can apply to the agency or the bank for another loan. This loan can be used for the purchase, construction or conversion of the property – which will be offered as second mortgage security. According to, this type of insurance will be the most interesting to the loan users who need additional funds for the renovation of the purchased apartments. This way they will be enabled to obtain them by pledging the same real estate – of course, with the fulfillment of the required conditions.

When Is A Mortgage Cleared?

The mortgage will expire when the secured claim ceases to exist. When this type of loan is paid to the agency or bank as a lender – the buyer has no reason to worry that the mortgage will not be cleared. With the termination of the claim whose security it serves – the basis for the existence of a mortgage ceases. Then, a debt settlement certificate and a mortgage clearing consent are issued. So, when the creditor’s claim that hypothec no longer exists, there is no basis for it – and the creditor is obliged to issue the consent for the deletion of the mortgage.

Professional Help

Numerous agencies are in their business almost daily encounter with the sale of mortgage-laden real estate. Their licensed agents have the knowledge and extensive experience in selling such homes and apartments. Also, they are supported by a team of attorneys who are competent and ready to assist at all times and provide the seller and buyer with all the necessary legal advice and adequate assistance in the process of buying a real estate.

More Buyers Are Expected For Such Real Estates

According to real estate agencies, interest in buying a home burdened with a mortgage is not too great – but it does exist. Estimates are that there will be more such customers. Today, many people want to swap that property for a bigger, better one – or simply close the loan. What can be an advantage of the new situation is the fact that the owners sometimes offer lower prices for the burdened properties. According to the agents, buyers will increasingly encounter this type of real estate on offer.