Features Of The Mortgage Of Land

2024 Author: Sebastian Paterson | [email protected]. Last modified: 2023-12-16 13:47

One of the ways to exercise your ownership of property is to use it as collateral. Owned land plots (with or without buildings) are not an exception. You will have to face the need to post a collateral, for example, when obtaining bank loans in your own name, or if you act as a guarantor (surety) when applying for a loan by third parties, when receiving goods for sale, when renting expensive items, in a number of other cases.

Compared with the most commonly used types of collateral, such as an apartment or a vehicle, the use of a land plot as collateral is in many cases preferable for both the mortgagor and the mortgagee. For example, an obstacle to using a city apartment as collateral is the encumbrance in the form of persons living there who have permanent registration at the address.

Despite the fact that the RF Housing Code provides for the deregistration of all persons upon a change in the owner of a dwelling, banks, as a rule, refuse to recognize residential real estate as a pledged item until the pledger submits Form 7 and 9 certificates on the absence of those registered in the apartment persons. In addition, the pledger, no matter how confident he is in his financial capabilities, should never rule out the possibility of some force majeure circumstances in which he will not be able to fulfill his obligations, and the pledge will become the property of the lender. In most cases, the loss of a land plot is, albeit an unpleasant, but not such a catastrophic event in a person's life as the loss of his only home. As for vehicles, even if some creditors are ready to take the car as collateral,it is usually on very unfavorable terms. The appraisal of the car is made much cheaper than the market value, it is required to conclude a full insurance contract at the expense of the owner, additional restrictions are often imposed on the right to operate the car, the circle of persons allowed to drive the vehicle, etc.

What should be borne in mind if your land plot is to be mortgaged?

First of all, make sure that the value of the land plot at market prices is not less than the amount of pledged funds (usually banks require an excess of the value of the pledged property by about 40 to 60% compared to the total payment on the loan). Information on the approximate market value of a plot can be obtained by comparing the price of similar plots in real estate agencies and specialized catalogs. If there are buildings on your land plot, the collateral will be both land and buildings in a "single package", so you will need to evaluate all real estate objects located on the land plot. It should be borne in mind that the final amount of the mortgage assessment of the property is determined by the mortgagee. You can agree with the assessment, or, if you disagree, refuse to conclude an agreement with this lender,however, it is not the responsibility of the creditor to substantiate and prove the appraisal of your property used as collateral.

The next step will be to check the compliance of the title deeds. Naturally, you can only offer property that belongs to you as collateral. With regard to a land plot, such documents are a certificate of ownership and a cadastral passport of the land plot, and for buildings, structures and structures located on the site, a certificate of state registration and a technical passport. Also, you may be required to provide documents confirming the absence of arrears in the payment of taxes and utility bills for these objects. If the land plot was purchased during the period when you were married, or during this period a house was built on the plot you purchased before the marriage,your spouse's notarized consent may be required to use the property as collateral.

With a long-term lending agreement, a situation is not excluded in which you will need to exchange the pledged real estate for another or sell in order to make a counter purchase of other suburban or urban real estate. It is better to discuss the possibility of such a situation with the mortgagee before drawing up the loan agreement. In cases where the value of the acquired real estate is higher than the alienated one, or you have already paid most of the debt, the lender may sometimes meet you halfway by allowing the alienation of the old plot with the simultaneous re-registration of the pledge for a new object.

According to article 339 of the Civil Code of the Russian Federation, a pledge of immovable property is subject to registration in the manner prescribed for the corresponding property. The Federal Law of the Russian Federation "On Mortgage (Pledge of Real Estate)" dated July 16, 1998 No. 102-FZ indicates that mortgages are subject to state registration by justice institutions in the Unified State Register of Rights to Real Estate in the manner prescribed by the federal law on state registration of rights to real estate and deals with him. State registration is carried out at the location of the property that is the subject of the pledge. On the basis of Article 14 of the Law of the Russian Federation "On Pledge" No. 2872-1 dated May 29, 1992, the body that registers the pledge is obliged to issue the registration certificates to the pledgee and the pledgor, as well as extracts from the register at the request of the pledgee, pledger and other interested parties.