Mortgage of property in Vietnam is not a big issue to mortgagors if they find out the solution to set out the payment scheme before getting a loan. However, proceeding with a Mortgage of property to guarantee a loan often contains many kinds of risk which not many people know. In this article, as Banking – Finance lawyers in vietnam, we shall identify and analyse 4 important things that must be clear when proceeding with a Mortgage of property in Vietnam.
Specifying the purposes of getting loans
To loans related to Mortgage of property, people often receive the loan for consuming and buying another property or transportation vehicles. Specifying the purpose of the loans shall assist the borrower in building a detailed scheme to carry out the payments.
Individuals who often receive a loan to buy real estate must guarantee that the value of the real estate shall be higher in the future. Thus, the original purpose for receiving the loan shall be satisfied. However, if the value of the properties does not increase, the borrower not only must pay the mortgage loans but also lost profits because of investing in a wrong real estate location.
Carefully reviewing a loan agreement
This is a principle that everybody knows when signing all kinds of agreements, but not everybody complies with. Frequently, the mindset of borrowers is, so whatever happens, they must have money immediately and so just take a brief view of the agreement and sign it.
This is fine if they make the payment on time. They forget that following the current law, they may use the collateral for many different loans if the value of the collateral is sufficient for all amounts of money that the borrowers use the collateral to get the loans.
It leads to many situations where the borrowers must suffer legal risks as mentioned in writing such as “the asset is guaranteed, but not limits the scope of guarantee written at clause 1 Article 1…”, meaning that if the value of a land is 1 billion VND but a loan is just 100 million VND, the land could be liquidated by a bank to fulfil the obligations of the borrowers in the case that the borrowers cannot make a payment on time.
To the banks, sometimes it is too difficult for themselves when the banks allow people to borrow money. For example, in some cases, the borrowers use the collateral which belongs to the third party when there is no clear term as examples: how to use the collateral; if the borrowers cannot pay on time; what the resolution related to settlement for the assets of the third party.
The time period of minimum lending rate and duration of disbursement
In addition, noticing the time period of interest payment, we need to be careful about the minimum lending rate while running the process of the mortgage at the bank. According to Banking – Finance experts, an important factor influencing which bank to select is the time period of the minimum lending rate.
The time period of the minimum lending rate may only exist in the countable duration. To avoid misunderstanding about the level of minimum lending rate, people need to be careful when reviewing the agreement. For example, many people are excited about State funding 30,000 billion VND with the minimum lending rate of 5%. However, they do not pay attention to the minimum lending rate which shall expire within 1 year from the draw down date. After this, the lending rate shall return to 10% per year, leaving customers embarrassed and confused about their payment scheme.
The value of assets are disbursed
One of the most important things that the borrowers must take care of is the value of the assets to be disbursed. Frequently, if you have a certificate of land use rights, the bank shall give you the amount of money identical to the same value as 80% of the value of land or building.
To mortgage bikes and other assets, the level of disbursement at the bank shall be maximum at 75%. The high value of disbursement shall help the borrower receive a big fund for investment.
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This paper relates to 4 things that must be understood when proceeding with a Mortgage of property in Vietnam. The principles above shall help customers manage their loan and guarantee that the purposes of the loan are accurate for making a profit.
In order to limit the risk of mortgages or in the case of a high value loan, the borrower should make reference to legal advice of professional lawyers about Banking – Finance to ensure that the process of receiving a loan runs smoothly while limiting the legal risks as much as possible.
If there are difficulties regarding Banking – Finance , please contact us: P & Associates is a professional law firm established in Vietnam and currently has nearly 100 members working at three offices in Ho Chi Minh City, Hanoi and Da Nang.
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