Every entrepreneur knows what a loan is. For those who don’t know, this summarization can explain:
A loan, or credit, is a type of debt. In order to grant a loan, an agreement is drawn up, according to which the lender gives or undertakes to give money or other assets to the borrower or to another person entitled under the contract, while the borrower undertakes to return the money or other assets to the lender under specified conditions.
But what is real estate? Specifically, what is real estate that your company could use to secure a loan?
Real estate is a type of property that is entered into the land register and has a specific owner – a private person or a company. When talking about real estate, we generally mean a plot of land and/or the buildings on it.
Real estate can be broadly divided into two categories:
commercial real estate (office, warehouse, and production buildings)
residential real estate (apartments, houses, cottages)
Similarly to real estate, loans secured by real estate can also be divided into two:
loans to legal entities
loans to private individuals
Finora offers both. An increasing number of small and medium-sized companies operating in Estonia have chosen us as their partner, but private individuals are also always welcome!
What is a mortgage?
If your loan is secured by real estate, an encumbrance, or a mortgage, is set on it upon signing the loan agreement, in which case the mortgagor (or the person in whose favour the mortgage is established) has the right to satisfy the claim secured by the mortgage at the expense of the pledged real estate. Therefore, loans secured by real estate are sometimes also called mortgage loans.
Explained in simpler language with the help of the juristaitab.ee website: if the claim secured by the mortgage is not satisfied (the loan is not repaid as agreed), the mortgagee has the right to demand the sale of the pledged real estate through the bailiff.
Or put it even more simply: if you don’t repay your loan, the real estate securing the loan will be put up for sale and the loan payment will be taken from the money received from the sale.
Loans secured by real estate from Finora
Loans secured by real estate, or mortgage loans, are the most versatile loan products that are well suited for
- acquiring or renovating new real estate
- financing studies
- starting a business
- refinancing existing liabilities
- acquiring of fixed assets and equipment
In addition to an unlimited number of uses, loans secured by real estate can have long terms – the loan repayment period can be as long as 30 years.
The size of the maximum loan amount generally depends on the value and location of the property, but not only these.
Who can get a loan from Finora, and how?
Finora follows the principles of responsible lending and we are indeed strict about the necessary documents, but still remain flexible in loan terms: our customers are not fragments of an anonymous mass, but individuals with their own needs and facilities.
Private individuals should definitely make sure that the new loan obligation does not put the borrower in a difficult financial situation. Therefore, we would like borrowers to provide us with information about their income and existing obligations with the loan application.
Also, in the case of a loan secured by real estate, borrowers are requested to present to the loan provider the statements of their current accounts from the last six months. We also expect information and an appraisal report about the collateral. If the collateral is an apartment located in a larger city and no appraisal report is available, the loan provider can generally estimate the value of the apartment themselves.
Therefore, in addition to the loan application, the following must be submitted to us:
- Bank account statements from the last six months
- Overview of existing liabilities
- Appraisal report of the property offered as collateral or, in the case of an apartment, exact address, description, and images of the property.
Annual percentage rate of charge
Almost every loan-related advertisement uses the phrase “annual percentage rate of charge”. But what does it mean?
The annual rate of charge indicates the actual total annual cost of the loan. It is displayed as a percentage, and in addition to the interest on the loan, its calculation also takes into account the costs related to signing and managing the contract (for example, contract signing fee, monthly management fee etc.).
The lower the percentage, the more affordable the loan. Therefore, comparing the annual percentage rates of charge is a convenient way for the borrower to analyse the offers of different lenders to make a more informed loan decision.
Borrowers often evaluate offers by the amount of the monthly payment and understandably prefer offers with smaller monthly payments. However, a loan with a lower monthly payment may have a longer loan period, which may mean a higher percentage rate of charge.
Therefore, it is important to make sure that the offers compared are identical in terms of amounts and periods. Loans with a longer repayment period have smaller monthly payments, but a higher annual percentage rate of change, which means that by the end of the loan period, the borrower’s total cost is significantly higher.
Loans secured by real estate for companies
Finora also offers loans secured by real estate for companies. In order to apply successfully, the following conditions must be met:
- The company is a private limited company or a limited liability company registered and operating in Estonia.
- No liquidation or bankruptcy proceedings have been initiated against the company.
- The collateral offered is liquid.
- The company has no active payment defaults.
However, each case is different, so don’t be ashamed to talk about your situation, even if it doesn’t seem unproblematic to you.
As a rule, when applying for a loan secured by real estate as a company, we expect to receive the following documents:
- Loan application, which you can fill out on our website or in the self-service portal
- Financial statements for the company (balance sheet and profit statement for the last completed financial year; balance sheet and profit statement for the last full quarter of the current financial year)
- Statements of the company’s bank account(s) for the six months preceding the submission of the application
- Appraisal report for the property offered as collateral, or if no report is available, we will make a preliminary assessment based on the information provided by the customer (exact address, description, and images of the property).
Why do we require so many reports and ask for an account statement on top of everything?
From the annual report we can see how your company was doing in the previous financial year. The balance sheet and profit and loss reports for the current year help us understand your company’s results in the current financial year.
Finora is not a bank, but we also have an obligation to understand our client’s business activities. This is why we wish to see the account statements of the last six months from the banks where your company has operations.
Why apply for a loan secured by real estate from Finora?
There are many loan providers in Estonia, and they all try to attract customers. Finora, however, is one of the lenders with the fastest growing customer base. In fact, there are multiple reasons for this:
Flexible repayment of the loan amount
The loan principal may be returned after the sales revenue or support is received, only interest has to be paid on an ongoing basis, which is especially suitable for projects that require bridging financing.
Fast processing of loan decisions and conclusion of contracts
If necessary, we advise on your loan project and help you find the best solution. Finora proceeds from the principle that the customer does not need to know the name of the loan product. It is sufficient if you explain your needs and we will find a suitable solution for you.
Fast application process
Finora is famous for its promptness and flexibility, and we will not compromise on our reputation. Surely, entrepreneurs have better things to do than spend a day at the bank office, waiting for an appointment with the administrator. Therefore, you can expect our initial feedback regarding the loan decision within one day. After the notarial transaction we can issue the loan within one to three working days, normally the same day as the notary appointment.
Please contact us and we will take a look at your needs together, evaluating all the aspects involved in taking a loan. After that you will be able to decide which loan product is right for you.
We are happy to meet you!