Applying for a home purchase loan is time-consuming – and there is a good reason for that: it regularly involves enormous amounts that should be repaid in easy steps over the course of many years. The bank is therefore taking on a risk that it wants to reduce in the interest of all borrowers with the appropriate means. She uses a land charge or a mortgage, so she grants herself rights to the property. That is why she needs meaningful documents in order to be able to assess the value of the property to be financed at all.
A question of security: a binding description of the property
Many aspects play an important role: On the one hand, of course, the building itself, if it is an existing property. There are a few questions to be answered: How old is the building, what condition is it in and how are the rooms divided? While the building description is used for a new building, which always includes a dimensioned floor plan, for many older properties only outdated building drawings or rough floor plans exist. Real estate buyers are well advised to invest in creating concise and, above all, up-to-date documents. Hand-made sketches with exact dimensions are sufficient to receive a professional result from the Hamburg startup Grundriss Butler within 24 hours: a dimensioned floor plan that meets the highest standards.
On the other hand, banks attach great importance to clarifying the ownership structure – this is where the land register extract comes into play. In the land register, not only are the owners explicitly listed, but also any rights of third parties. This can be an old land charge or a mortgage, but also rights of way that affect the value of a property. In addition, those wishing to build or buy should definitely submit a cadastral extract to show the dimensions, location and use of the property. In any case, meaningful photos are among the documents that a bank requests for an assessment – in the case of new buildings it is of course the design drawings.
The effect on conditions: manageable risk – favorable interest rates
The bottom line is that the effort is definitely worth it: the bank can quickly assess the relationship between the loan applied for and the value of the property. The lower the share, the more favorable the conditions are. This can be easily explained: If the loan can no longer be serviced, the bank will exercise its right to sell the property – in such a case, it will have the property auctioned. The greater the likelihood that the amount given out as a loan can be redeemed if it is realized, the more generously the bank can act – since its risk of default is extremely low.
But especially when building owners or real estate buyers want to finance beyond this so-called lending limit, it is all the more important to describe the property comprehensively. It is not for nothing that professional exposés, on the basis of which real estate agents conduct their business, contain all of the documents mentioned – official extracts, high-quality photos, dimensioned floor plan and much more. Only in this way can all parties orientate themselves in such a way that a sustainable decision is possible – and that is exactly what matters.
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