As a rule, the most optimal collateral for a bank is real estate – an apartment or a house, as well as a cottage or a dacha, a plot of land or a garage, commercial real estate, and so on. Before arranging the collateral, it will be necessary to conduct a market valuation of the property. Valuation for a notary, embassy (when arranging travel abroad), or guardianship authorities is ordered from a specialized company providing such services.
When offering real estate as collateral, one should remember the following mandatory requirements that the bank imposes on it.
1. Ownership of the property must be documented – the bank must know how it came to the client, i.e., whether it was inherited or as a result of a purchase and sale agreement.
2. The property itself must have its technical passport, and if it is a land plot or a private house with land, a cadastral plan with a registration number.
3. All taxes on the property must be paid, and the validity periods of all documents must be at least as long as the term of the loan.
4. If the collateral property is jointly owned (e.g., by a spouse), then a notarized permission from the other party to transfer the property as collateral will be required.
5. The bank will accept real estate as collateral if it is not dilapidated or in disrepair – it must be liquid, so that if the loan is not repaid, it can be easily sold to cover all debts. Agree – no one will take as collateral a small house in a remote village without roads and gas.
6. Before signing the loan agreement, a preliminary material valuation and expertise of the collateral object must be included – in this case, such work will be carried out by the bank's own experts or independent organizations on its behalf.
Throughout the entire repayment period of the loan, the owner of the property pledged as collateral has no right to sell or exchange it, draw up a will or gift deed, or perform any other legal transactions involving it. In addition, insurance of such property is mandatory (the borrower arranges this at their own expense). The amount of the loan secured by the collateral will directly depend on the valuation of the property – the more expensive the house or apartment, the larger the loan the potential loan applicant can obtain.