If this is the case, then does the mortgage kick in to pay it all off?
2007-11-08 13:49:53 · 3 answers · asked by Hopefully wiser now 1 in Business & Finance ➔ Renting & Real Estate
So that the owner also shares the risk. You now have 20% to lose. With a 100% loan, what do you care if the project goes bust, you just declare bankruptcy and move on. The bank is then out their money
2007-11-08 13:54:16 · answer #1 · answered by marystoy_2000 5 · 0⤊ 0⤋
reply number one is correct... when building or when developing, banks want the borrower to "have some skin" in the deal. If you have nothing to lose (only the banks money syndrome), no big deal. If you are gonna lose your money too, you will bust heads to get a project moving. See the motivation factor there? The bank knows you will be looking out for the project, and protect their investment. A mortgage is a different product than a construction loan, with 2 different objectives. A mortgage will take out a construction loan.
2007-11-08 21:58:50 · answer #2 · answered by Rafael P 4 · 1⤊ 0⤋
In case of a default on paying the loan off, the lender will have 20% equity in the property to cover the expenses of selling it off.
2007-11-08 21:55:30 · answer #3 · answered by Anonymous · 0⤊ 0⤋