Life is full of unforeseen events, both good and not so good. In the economic field, we could have difficulties facing a payment that is too high or want to make an investment for which we need to request financing. In both cases, we could consider Phh mortgaging our house, one of the most effective alternatives to obtain liquidity. However, this option also has some risks that we must not lose sight of. In the following article, we will discuss the pros and cons of giving our home as a guarantee.
3 pros of mortgaging the house
Mortgage the house consists of getting them to lend us money by putting a house as a guarantee of payment. In order to do so, the first thing we must bear in mind is that the property in question must be free of charges since almost no entity offers loans with the guarantee of already mortgaged houses.
If we meet this basic requirement, then we could try to benefit from the following advantages:
- More opportunities to obtain liquidity. Normally, banks show a greater predisposition to offer to finance if we provide a property as collateral.
- Better financing conditions. In addition, the interest rates on mortgage-backed loans usually range between 3% and 4%, unlike the rest of personal loans, which double or triple this percentage. Of course, if our financial profile is not very good, the interest rate could exceed 10%.
- Guarantee for other properties. Mortgage our house can also serve as collateral for the mortgage of a second home or to guarantee a family member. In this way, the possibilities of obtaining financing will increase.
REMEMBER! Before mortgaging the house, it would be advisable to compare the financing conditions offered by various entities.
The great disadvantage of putting the house in guarantee
Although it is true that mortgaging our house is one of the fastest ways to obtain financing, this option has a great risk: we could lose it. In the event that we stop paying the installments, the bank or the lender could seize the property and even our present and future personal property up to the amount that pays the debt.
To avoid this, it would be advisable not to assume financial obligations that exceed 35% of our debts. In other words, all the loans that we have in force plus the financed purchases and any other monthly charges should barely account for a third of our salary.
In practice, if our family unit has an income of 2,000 euros, we should not allocate more than 700 euros to paying debts.
Get liquidity without risking losing the house
To finish, we may be interested in knowing what other alternatives we have to obtain financing without risking losing the property. These are some of the possible options:
Rent a part of the house. If we need money, perhaps we could get extra income by giving part of our home to another tenant in exchange for a monthly fee that allows us to be more comfortable with debts.
Sell some goods. Another way to obtain liquidity could be to sell our car or any other asset with sufficient value to be able to afford the payment we owe.
Apply for a personal loan. If we ask for a conventional loan without putting the house as collateral, we could have to pay a higher interest, but in case of non-payment, we would not lose the house.
Sell the house. If we do not find another solution, we could even consider selling our house and moving to a more affordable one or even renting.