Everything you need to know about the mortgage market
Buying a mortgage can be overwhelming without the right information and advice from mortgage experts. Fortunately, it gets a lot easier when you understand the basic methods of mortgage categorization.
A mortgage, in many ways, is a lot like buying a home – there are different options that meet different needs. Mortgages come in many different types and can be structured in different ways. Mortgage buyers are always advised to find the one that matches their financial priorities.
While all mortgages share the same goal – financing the purchase of a home – they each have unique advantages, disadvantages, and conditions. Ultimately, the type of home loan you choose will have a huge impact on your future mortgage payments and your overall financial health. Mortgage structures are many and varied and depend on the financial institution offering the mortgage. In this article, we discuss some mortgage structures unique to the Ghanaian market and in particular Stanbic Bank.
Buying a house
The first option, buying a house, is the most common option in the Ghanaian market. This is a lending institution that provides funds to a home buyer for the acquisition / purchase of an already built home. Under this arrangement, the lending institution holds title to the property and does not return it to the owner until after the mortgage payment has been completed. In the event of default, the lending institution has the right to repossess the property and sell it to repay the mortgage.
Promoter Construction Financing
The second option is what is called developer construction finance. This mortgage financing structure involves financing a project from start to finish. The lending institution disburses the funds at different stages of the construction process until the property is completed. Off-plan financing is possible under this option. In the end, the cost of the mortgage is spread over a number of years for the home owner to pay.
The third option is what is commonly referred to as the release of equity, which involves a bank paying an owner the value of an existing property so that the owner can buy another home or use the proceeds from them. other purposes. A capital release allows you to unlock the value of your existing property by taking out a loan and using the money released for various personal needs, including buying another prime home or land, or the expansion of the house, among other things.
Refinancing a mortgage simply means allowing a new bank to take over your mortgage. This is a credit institution that reimburses your old mortgage exposure to another institution. Most mortgage buyers choose to refinance so that they can reduce their interest or shorten their payment term or take advantage of the conversion to cash of a portion of their home equity. With this option, after valuation of the asset, the exposure is amortized and the balance is returned to the customer to be used for other purposes.
Home expansion financing
Home expansion funding, as the name suggests, involves accessing funds for home renovations, remodeling and expansion. Mortgage buyers, under this structure, approach lending institutions to acquire funds to work on existing properties. Here too, the amount accessed is spread over a period of time that the borrower has to pay.
Financing of vacant land
The financing of vacant land implies a financial package for the acquisition of land. The purpose of seeking vacant land funding is to one day build a house on the land without being determined within a specified period of time. Therefore, unlike most home loans that are used to finance the purchase of a land and real estate complex, a vacant land loan is only used to become the owner of a block of land.
Public service funding
Public service financing for mortgage loans is reserved for people in the Ghanaian public sector who are in need of mortgage financing. This is a special mortgage deal that is unique to some banks in the country, such as Stanbic Bank through the Ghana National Mortgage Scheme.
While these mortgage structures are not exhaustive and may not reflect what happens in other jurisdictions in Ghana they are the most popular and knowing them will help and guide mortgage buyers in their decision making process. .