In our Mortgage School we have talked to you about the types of mortgages that exist in the market and also about other concepts related to the financing of a home. However, in this post we will talk to you about a term unknown to many people , the maximum mortgage , also called a floating mortgage or global mortgage.
The maximum mortgage is a type of mortgage whose purpose is to guarantee several obligations at the same time. It is not necessary for these obligations to exist at the time of constitution of said mortgage and it is not necessary to determine their amount. What is indicated is a maximum that the mortgage liability can reach. In this way, the cost necessary for the constitution of different mortgages or loans is reduced, one for each obligation that we have in the same financial institution.
Why is the maximum mortgage used?
The main advantage of a maximum mortgage is the cost savings , since it is not necessary to novate the mortgage to include new properties or apply for a new mortgage, which would entail more expenses. In addition, this mortgage allows savings on notary fees, registry fees or the Tax on Property Transfers and Documented Legal Acts.
It is currently used as a financial instrument that provides flexibility to the mortgage market, and is used in complex financing and refinancing operations.
Let's see an example:
Let's suppose that Mr. S has contracted these financial products with bank B:
A loan of 12,000 euros
A credit in a current account for an amount of 40,000 euros
A commercial discount line with a limit of 60,000 euros
The client has provided his personal assets as collateral for all these financial products .
Bank B and Mr. S may wish to give more security to these transactions by formalizing a maximum mortgage . With this maximum mortgage, a mortgage is created on Mr. S's home guaranteeing the three previous operations at the same time for 5 years. In this case:
For the loan of 12,000 euros, the amount of Mr. S's obligation is clear.
In the case of credit and commercial discount lines, the amount of the debt cannot be known in advance. We can only know its maximum limit.
