Real estate loan
A mortgage is banking a credit , by mortgages ( mortgage , mortgage or land charge is secured) and its lending limit of up to 60% of the mortgage lending value of a property may be allowed. The opposite is personal credit .
General
The compound "real loan" indicates that it is a loan against the provision of real securities . In the banking sector in particular, however, the term is narrowed to a loan secured solely by mortgages. The creation, assignment or pledging of a mortgage or land charge on real property or rights equivalent to real property come into question as liens . Real loans are used to finance the purchase , new construction , renovation or conversion of real estate. Full financing is the exception, as the credit institutions also expect the borrower to use a reasonable amount of equity capital by means of a lending limit , with which he also demonstrates his own willingness to take risks . With real estate loans, the focus is primarily on the object to be loaned, while with personal loans the creditworthiness of the borrower is prioritized. However, this does not mean that the creditworthiness is not examined for real estate loans because, among other things, the debt service coverage ratio has to be examined.
Classification under banking law
The capital adequacy ordinance applicable throughout Europe has a decisive impact on the lending practice of credit institutions in real estate finance . It represents the quality of mortgages and their monitoring and review specific requirements for credit risk mitigation effects of reducing the capital requirements to achieve. According to Section 10 No. 8 KWG , the provisions of the Capital Adequacy Ordinance have been in effect since January 2014. These allow the use of a mortgage lending value of real estate when determining the risk weights and risk exposure values of real estate loans only in those Member States which have stipulated strict requirements for its assessment in their legal or administrative provisions. The new Solvency Ordinance (SolvV) therefore clarifies the requirements that a mortgage lending value must meet for the purposes of the Capital Adequacy Ordinance. These requirements are finally listed in Section 22 SolvV. Thereafter, the mortgage lending value must meet one of the following conditions:
- Determined in accordance with Section 16 (2) sentences 1 to 3 PfandBG in conjunction with the Mortgage Lending Value Determination Ordinance
- Determined in accordance with Section 7 ( 7 ) of the Building Societies Act, taking into account a provision approved by BaFin in accordance with Section 5 (2) No. 3 of the Building Societies Act
- In relation to a property in another country of the European Economic Area and determined on the basis of the strict legal or administrative provisions applicable in this country, which BaFin has recognized as being equivalent to the Mortgage Lending Value Determination Ordinance
- The mortgage lending value is a sustainably achievable value determined differently, which meets the requirements of Section 16 (2) sentences 1 to 3 PfandBG.
Section 21 (3) no. 1 KWG also refers to the PfandBG that is now in force.
The previous minimum requirements of Section 20a Paragraphs 4 to 8 KWG a. F. are now also regulated in the Capital Adequacy Ordinance (English abbreviation CRR). The minimum requirements in Art. 125 No. 2b CRR require that the value of the property must not correlate significantly with the creditworthiness of the debtor. This includes industrial properties used by the borrower himself , the values of which depend significantly on the income that he achieves through the special use of the commercial property (e.g. for factory buildings). Art. 208 para. 2 CRR requires the legal enforceability in all relevant jurisdictions (Art. 208 para. 2 CRR), the mortgage must meet all legal requirements (Art. 208, para. 2b CRR), must be timely recyclable (Art. 208 Para. 2c CRR), have adequate damage insurance (Art. 208 Para. 5 CRR), are appraised by an independent expert (Art. 229 Para. 1 CRR) and are approved annually (commercial property) or every three years (residential property) monitor the lending bank (Art. 208 CRR).
Objects to be lent
In the banking sector, a distinction is made between mortgage lending properties and residential properties . While residential properties are predominantly used for residential purposes, commercial properties are predominantly used for commercial purposes. This distinction aims to take into account the different risk of these properties when loaning. Among the residential properties include home ownership , family houses , apartment buildings and entire housing estates . Commercial properties include doctor's offices , office buildings , retail properties , warehouses or entire industrial areas .
- According to Section 181 (9) BewG, residential properties are to be understood as a “combination of a majority of rooms which, in their entirety, must be designed in such a way that it is possible to run an independent household ”. They are fungible as commercial real estate, because a wider housing market whose recovery easier. In addition, fluctuations in value due to the shortage of living space in normal times (exception: real estate bubble ) are low. Finally, a high degree of standardization ensures broad demand on the real estate market .
- There are usually very few interested parties for individually designed commercial real estate , so that there is usually a narrow market; Most commercial properties are unique . This is due to the limited or lack of third-party use of specifically oriented properties, which increases their volatility . The third-party usability of a commercial property is to be denied if it is foreseeable that considerable renovations are required for another use, which are economically equivalent to a new building or if its nature or its special location does not permit third-party use. In the case of commercial real estate loans, it is therefore necessary that, as a rule, only office space and multi-purpose business premises that meet the requirement for third-party use are to be lent. A property used for commercial purposes can be used by third parties if it can be used by a third party in the existing state of construction without further measures. The current marketability is independent of this.
These business evaluation criteria result in different banking management of both types of property, which is expressed in different lending limits.
Lending Limits
Under these legal and lending requirements, in individual cases residential properties that are used or rented by the owner themselves may have a lending limit of 80% of the lending or market value (Art. 125 No. 2d CRR) and, for commercial properties, 60% of the lending value or 50% the market value (Art. 126 No. 2d CRR). According to § 14 PfandBG, the lending limit for real estate loans in Germany is 60% of the lending value if they serve as congruent cover for Pfandbriefe . If residential real estate fully fulfills the requirements of the CRR, they are assigned a risk weight of 35% of the credit (Art. 125 No. 1a CRR), for commercial real estate a risk weight of 50% applies (Art. 126 No. 1a CRR). These risk weights result in lower equity backing for real estate loans, which results in lower credit margins .
Real loan splitting
The technical language also knows the term real loan splitting, of which there are the subspecies real and fake real loan splitting. Both have in common that a property is encumbered with a mortgage, although the respective statutory lending limit is actually exceeded when the loan is granted. The fake real loan splitting, i.e. the division of a real loan into a real loan part reaching up to the lending limit and a further personal loan part , is permitted without separate loan agreements having to be concluded for the different loan parts. This does not conflict with the fact that different types of repayment modalities can be agreed in individual contractual loan agreements for the two different credit partial amounts. In the case of real splitting , two loan agreements are concluded for this purpose, which are divided into a real loan part and a part that is also secured in the land registry (just "split"). The fake real loan splitting, on the other hand, only knows a uniform loan agreement which - apart from different interest / repayment rates for the real estate loan and the remaining loan - does not contain any information on the bank's internal division. Splitting is necessary because the real estate loan component receives a better risk rating under supervisory law and is therefore favored by a lower capital adequacy requirement for the credit institution (see article on mortgage lending value ). Its favorable risk classification is due to the fact that if the loan is only 50% or 60%, the probability is very high that the loan can be repaid using the proceeds from the property on which it is lent.
Accounting
Under banking supervisory law, real loans are considered part of the “claims on customers” and are therefore part of the risk position . In the bank balance sheet , they are to be shown separately from the other “claims on customers” in a spin-off item as “secured by mortgages” in accordance with Section 15 (2) sentence 1 of the credit institution accounting regulation (RechKredV).
Credit institutions
Not only mortgage banks , but also savings banks , cooperative banks or commercial banks are allowed to grant mortgage loans.
Web links
Individual evidence
- ↑ Jürgen Lindauer, Real Estate and Taxes , 2010, p. 53
- ↑ Deutsche Bundesbank, Expert Committee on Security Techniques ( Memento of the original dated February 3, 2007 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.
- ^ Opinion of the Deutsche Bundesbank on real loan splitting, May 2006, p. 35 ( Memento of the original from October 10, 2007 in the Internet Archive ) Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice.
