Banks are picky when it comes to lending: only those who consider them creditworthy will get a loan. The range of possible collateral is large. We have put together the most important for you.
When it comes to collateral, banks attach great importance to three aspects: they should be easy to value, they should be marketable, readily disposable at all times, and they should not lose value. In particular, the last point is important: if the creditor’s remaining assets shrink, the collateral should retain its value. Then they are especially valuable for banks.
In the case of a guarantee, a third party is liable for the loan that the debtor receives from the bank. The latter can then demand the loan repayment from the guarantor if the actual debtor should be unable to pay. The rule is the so-called default guarantee, in which the bank must first process the debtor before asking the guarantor to pay. In the case of a direct guaranty, the bank may prosecute both the creditor and the guarantor equally. This form of guarantee implies that the guarantor must reclaim his money from the debtor of the bank itself. For example, spouses, business partners or relatives may be considered guarantors. Above all, however, the spousal guarantee was sometimes condemned as immoral by the Federal Court of Justice,
In order to strengthen the creditworthiness of a subsidiary, parent companies can vouch for their group subsidiaries. The guaranteeing society is the “patron” in these cases. This type of credit security is also widespread among public-law local authorities.
The lynchpin of your real estate financing is the land charge, which is often referred to as a “mortgage”. But between mortgage and mortgage there is an important legal difference:
A mortgage is always associated with the loan that it is supposed to secure. Parallel to the repayment, the amount of the mortgage is reduced, with the full repayment of the loan, it automatically expires.
A mortgage, on the other hand, is independent of the credit and remains in full until the beneficiary of the mortgage agrees to be erased.
Example: You conclude a real estate loan of 150,000 euros and repay 40,000 euros over the course of eight years. If you had provided a mortgage, the amount would be reduced to 110,000 euros after this time. If, on the other hand, a mortgage serves as collateral, its sum is still at € 150,000 even after eight years.
Because the mortgage for the bank is associated with a high administrative burden, the mortgage has become common as a common lien on real estate financing.
In the case of a foreclosure sale, the following applies to mortgages: First, the one who receives the mortgage in the land register gets his money. Thereafter, in the order of registration, the other mortgagee creditor’s turn comes. The further down a creditor is, the greater the risk for him of losing money – if the auction price is lower than the sum of the land charges.
Therefore, banks prefer the so-called “senior” mortgage debt security. For residential real estate, the rule of thumb is:
Up to 60 percent of the mortgage lending value is considered senior.
The range of 60 to 80 percent is considered secondary.
The range from 80 percent is subordinate.
The mortgage lending value is calculated from the market value or purchase price, from which ten to 20 percent depending on the object is deducted as a haircut. Second and subordinated loans are generally higher interest rates than senior loans.
In the assignment of claims or assignment, the creditor assigns his claims that he has to employers or customers as security to the bank. Many loan agreements provide for the assignment of salary or salary of employees. Even for the self-employed, the assignment of debts is a very important element in getting a loan at all. The assignment of claims from an insurance can play a major role in securing credit, especially when buying real estate. These include, for example, residual debt insurance or term life insurance to cover the risk of death.
The Lombard loan is a short-term real loan and is tied to the delivery of a specific item. This is done through a pledge, in which the thing actually passes into the possession of the creditor, although the borrower legally remains the owner. Particularly popular is the Wechsellombard, in which securities are pledged. In the case of transfer by way of security, the borrower can continue to use the assigned property: he thus remains the owner and transfers the ownership rights to the bank in the form of a possession condition. Particularly in the case of machines or vehicles, this credit protection is particularly advantageous for the borrower because he does not have to do without the means of production.
In the case of life insurance mortgage lending, repayments are made in an indirect way: they only pay interest on the loan and at the same time save a capital-forming life insurance. In this constellation, the bank usually demands an assignment of the insurance credit in addition to the land charges.
In concrete terms, this means that if the insurance is disbursed or terminated, the bank first and foremost has a claim to the disbursement amount
If a borrower makes a negative statement, he promises the lender that he will not divest or lend significant assets without his consent. Due to this letter of intent, also known as a negative clause, a costly entry in the land register is waived.