Housing and land

What should you check in a mortgage contract?

Huquqchi legal team

A mortgage is a pledge of real property. The contract is written, notarised and state-registered; a mortgage for a primary-market purchase needs no notarisation. A breach of these requirements makes the contract invalid. Check the rate, the payment schedule, early repayment and the foreclosure procedure. Out-of-court foreclosure needs a clause in the pledge contract or a later notarised agreement.

The clauses to check

The interest rate, and whether it can change; the full sum of the payments (with interest and fees); the payment schedule; the conditions for early repayment and whether there is a penalty.

The foreclosure procedure

The contract must state clearly how foreclosure on the pledged property works if the debt is not paid. This is the most important clause. Under article 280 of the Civil Code, foreclosure on pledged real property is made by a court judgment. Foreclosure without the court is possible only if the pledge contract provides for it, or on the basis of a notarised agreement made later. Check whether your contract has such a clause.

Registration

Under article 271 of the Civil Code, a mortgage contract is made in writing, certified by a notary and registered by the state. A mortgage for the purchase of real property on the primary market is free from notarisation. If these requirements are not met, the contract is invalid.

Advice

Before you sign the schedule, calculate the total sum of the payments for the whole term. A low monthly payment does not mean a smaller total sum.

Legal sources

Legal basisCivil Code, article 271 Legal basisCivil Code, article 280 Legal basisCivil Code, article 265

This article gives legal information, not legal advice. For your own situation, consult a qualified lawyer.