Using Property as Security for a LoanUse the property as collateral for a loan
In essence, this includes proof of the value of the property to be used as collateral, which is then matched against the value of the loan. You will also consider any additional net inflow from the property so that the creditor can make sure that the loan repayment is made.
The most likely prerequisite for the loan is that you have a proper appraisal of the property and not just a desk top appraisal, this can involve tenant detail, rental payment and backlogs. However, your lawyer must also check your rating, which has a section on specific issues, and notify any doubts to your creditor.
They must make a "Report on title" available to your creditor. Then your lawyer will check the ownership of your property and confirm to your creditor that it is appropriate for crediting. In general, this means that your property must not contain any limitations or other defects that could impair the value of the property.
If, for example, you plan to expand your property and convert its use from living to business, you may need to prove that you have obtained the required design permission and that there are no limitations in titles or restricted warranties against the new use. Within the scope of the Titelbericht, you must have the property searched.
Default research shows whether there are environment related questions to consider, which kind of service is associated with the property, whether there are design changes in the vicinity of the property, such as street or rail suggestions that may affect your actual or planned use of the property. Your creditor must be informed of all affairs relating to the property.
When you already have a hypothec on your property, you must obtain the approval of your current creditor for a second one. Then, if they approve, you must pass on the fact of your first hypothecation to your new creditor if you have not already done so.
However, your new creditor may not be willing to act as a second borrower, as this means that in a defaulted or bankruptcy scenario, interest on your property will be postponed and will only be repaid if enough money is available after the first one. When you have the approval of your current creditor and your new creditor consents to be a second mortgagor, you must arrange the conditions which are usually included in a "priority certificate".
A lot of creditors have their own type of certificate, dependent on the value of the loan and the particular detail of the deal. Your financing arrangements with the creditor will be specified in a special contract, usually a credit note or covenant. Your new hypothecary's conditions will include these conditions and the lender's default conditions.
It also includes your obligation to repay the loan, to keep the property in good condition, not to make any changes to the property, not to conclude any rental agreements or other fees without the agreement of your creditor. The purpose of these commitments is to safeguard the value of the property.
When you buy a property, you should consider what your stamping duties and any fiscal treatment regarding rental fees, up to and personal taxes, will look like and where you can make a gain on the purchase of a property if you are subject to investment income taxes. This is only a brief outline of the most important ideas when handling collateralised loans.
Prior to signing a credit agreement with an expert attorney for industrial property, it is important that you obtain impartial counsel on law, appraisal and finance.