Buying property often calls for the engagement of a bank to write a mortgage or set up a new credit line for the investor. At the time of closing, i.e., formal conveyance and acceptance, the seller will demand to be paid in full by certified cheque or a letter of credit. Basically, mortgages are extended for 5 to 10 years at a fixed interest rate along with at least 1% annual repayment of the original mortgage toward the principal. The mortgage is held by the bank and entered in the land register.
Before setting up a credit line, banks will evaluate the property by analysing risks, state of repair, location and sustainability by a surveyor and internal methods – this process may result in expenses and some time delay of around 2 to 4 weeks.
The processing and review of the information can be expedited if it has been properly prepared – the documents are valid only if delivered complete and in time for the bank institute’s examination to be completed.
According to the complexity and size of a project, a bank will need 4 days to 4 weeks to announce their decision about the investor’s mortgage application.
Upon a valid approval and commitment by the bank to grant a credit line/mortgage for the purchase and approval of the buyer’s down-payment equity, formal notarisation can proceed.
A second, important issue are additional costs due to legal paperwork.
The notarisation fee, official processing fees and broker’s commission differ slightly according to the purchase price. Those additional costs must be paid by the buyer within the purchase period in order to have the deed entered in the land register. Banks typically write mortgages for 60% to 80% of the net purchase price only. The remaining balance of 20% to 40% and ensuing costs is the investor’s responsibility to pay from his personal funds.
