The types of mortgages granted by banks are numerous and vary according to the customer’s needs: they range from requesting a loan for the purchase of the first home to a building loan to build or renovate a property. The latter is a particular category of loan since it is granted in the presence of specific requirements that differ from cases in which a mortgage is requested to buy a house.
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As the term “ building ” suggests, the loan is disbursed if the customer needs to build a real estate structure or if he intends to carry out major renovations on an existing building, but does not have the necessary liquidity to meet the expenses. The construction sector includes not only the construction but also all those interventions that will serve to adapt a property to the anti-seismic regulations, the laws on energy saving, or those municipal regulations that allow you to redefine the plan of a house. On a par with what happens in the cases of granting the loan for the purchase of the first home, even with the building loan, the debtor can obtain part of the capital necessary for the construction or renovation of the property: the main difference consists in the methods of disbursement of the loan, since only in the first case will the loan amount be paid on a one-off basis.
How the building loan is disbursed
In the hypothesis of a building loan, the capital is deferred in installments paid from time to time based on the progress of the work. What the bank tends to protect is the possibility that, in the event of default by the debtor, it cannot make use of the property subject to the loan, losing in advance the entire capital borrowed from the borrower. When a mortgage is requested, the bank generally does not grant a sum equal to the entire value of the property but allows for up to 80% of the cost of the house to be obtained. If the house is already built and ready to be inhabited, the property constitutes a guarantee in all those cases in which the borrower is unable to repay the amount obtained on the loan. With’ 80% of the value, the bank would be able to recover most of the debt by proceeding through an auction and would protect its capital from any default by the borrower. In the case of the building loan, the construction or renovation works to modify the actual value of the property: on the one hand, the construction of a structure does not guarantee the recovery of the loaned value (the construction could be suspended for any reason), on the other hand, the renovation could negatively affect the possible sale of the house, depreciating its market value. Not being able to register a mortgage on the property to be built, nor on the house renovation project, the bank protects itself in this way, disbursing the loan from time to time according to the progress of the work. In this way it will be able, using an appraisal, to verify the type of interventions and the value acquired by the property at specific times,
The necessary guarantees
Grant a building loan for the construction or renovation of a property does not mean not presenting suitable guarantees: it is, in any case, a mortgage endorsed mainly by the first-degree mortgage that will affect the land (in case of construction) or the initial value of the property (in case of restructuring). The mortgage is registered in the deed of granting the loan which, according to the law, must take place by public deed in the presence of a notary. The mortgage is entered in the public registers as an annotation on a property that already exists, which is why it is necessary to place it on the land (in the case of a building loan for construction) or possibly on a rustic (for loans requested in cases of restructuring). A further guarantee is the presentation of the last paycheck that certifies the debtor’s income and his ability to repay the sums given in the mortgage. The paycheck is necessary for employees while for freelancers and entrepreneurs it may be required to present suitable documentation certifying the income from their work. In both cases, the bank will in any case evaluate the creditworthiness for the definition of the interest expense and will structure the repayment plan according to the needs of the debtor.
The clauses for the disbursement of the building loan are contained in the loan deed which will provide for both the granting procedures and the terms for repayment of the loaned sum. The presence of the notary is only necessary at the time of stipulation and not every time the various quotas will be credited, as these are deadlines already established in the contract. The expert’s fee is also defined in the contract as it is a cost envisaged by the bank from the time the financial products are promoted: just read the information sheets of the branch carefully to immediately know the total cost of the expert’s reports.
Duration and costs of the building loan
The building loan, like a mortgage for a first home, can be requested for a maximum term of 30 years and a minimum duration of not less than 18 months: in no case will the bank grant more than 80% of the value of the property unless no further guarantees are presented, such as any sureties. The role of the expert is fundamental for the disbursement of the loan since his task will be to evaluate a series of documents, including the estimates left by construction companies and the designs developed by the renovation companies. The documentation must be complete and exhaustive as the absence of a single act will be enough to block the granting of the loan: it is, therefore, important to comply with the bank’s requests to avoid bureaucratic delays in disbursing the loan. The expert intervenes every time the bank disburses part of the loan; will evaluate the progress of the works and will attribute the value to the building built or renovated. And it is precisely on this value that the amount of each tranche issued in fulfillment of the terms established in the contractual phase will be based.
As for the mortgage for the purchase of the house, also the building one provides for costs of investigation and management of the practice, but these are fixed and non-variable costs based on the methods of repayment of the loan. The amortization plan for the repayment of the building loan is mainly structured based on the debtor’s needs and the guidelines of the financial products promoted by the bank. Generally, the repayment takes place in monthly installments but it is possible to proceed with quarterly or half-yearly installments, depending on the agreements stipulated in the contractual phase. Finally, the building loans can be granted both to private individuals and to construction companies that need financial support for the completion of the building structures. The disbursement of each installment will take place within the pre-amortization term (which consists of that period in which the debtor pays back part of the interest inherent in the loan) which does not normally exceed 24 months from the moment in which the deed of payment is stipulated. mutual.
A particular feature of the building loan for builders is to split the loan as soon as the construction of the building is completed and the individual apartments are sold. In this case, the debt can pass into the hands of new buyers (if they request it) and not completely affect the overall value of the building structure.
