What is a loan union?

Are you doing a construction project? Or maybe a home purchase? Have you ever encountered the word ‘loan union’ several times, but are lighter uncertain about what exactly this means? Then you come to the right place. There are many different terms and definitions when it comes to the loan world, and in this blog we give you an easy and quick overview of what exactly a loan association is and what it means to you. See this page for all the information you need.

What is a loan union in the rough?

Dear child has many names. A loan association is also sometimes known as a mortgage bank or mortgage association. It can also be called a mortgage bank. Whatever it is called, however, it is a form of unity that cooperates with the banks when offering loans (also known as mortgage loans). They are offered as real estate loans to private individuals. Initially, these loans could be up to 60% of property value, but it has increased gradually since then, and depending on the individual situation, it may actually be as much as 80% of the value of the property.

The associations were already formed back in the year 1979 and are thus far from a new invention. The name comes from the fact that in the old days these associations covered a collection of borrowers who could open cheaper loans through a booklet jointly for them. These loan unions get money for lending by issuing bonds they then sell up the stock exchange. These bonds are a form of debt certificates where the specific terms of your loan and your repayment of the loan are realized. It thus means that the price actually ultimately becomes the deciding factor when it comes to the interest rate that will apply to your particular loan. So if you take out a loan from a loan union or mortgage loan institution, you end up having to pay expenses in the form of interest, loan repayments and a final contribution to the association.

There are several major loan unions in Denmark that you have already heard of. This applies to Nordea Kredit, Nykredit, BRF loan, DLR loan, Realkredit Danmark, FIH mortgage, Totalkredit, BG loan and many more.

What things should you pay attention to?

Of course, there are always several things that one must be on before taking a loan. First of all, it is always important that you compare different banks’ prices, reputation and service with what your needs are. In this way, you can quickly decide whether to proceed with the loan negotiations at this bank, or whether you should instead look for another bank or other lending institution that can give you the best deal.

When you look at this specific market, you can see that the actual price and interest rate developments remain roughly the same for most mortgage-loan institutes (although we will always recommend that you double-check it at the time of your loan). Therefore, there are many who will claim that these two factors are not the deciding factor when it comes to your mortgage loan. Instead, the rates of the various associations tell a different story, and it can often be a place to watch if the most important criterion for you is to find the cheapest loan union to save money.

Another important thing to note is that the interest rate for this type of loan is actually much cheaper than others. In short, the reason for this is that the security of repayment is secured on real estate, which means that the risk of the loan union not getting their money back is much lower. The interest rate is dependent on the bonds sold to cover the loan, but due to the minimal risk, it is below 10% under normal circumstances. If you take and compare it with quick loans, bank loans or other types, then that type of loan will often have interest rates above this level. Therefore, if you do not have fully mortgaged real estate then this type of loan is worth considering. In many ways, it can be beneficial if you have to spend money.

What different mortgage loans are there?

The first type of loan you can choose is fixed-rate mortgage loans. If the loan is fixed-rate, it means that the interest rate remains the same throughout the loan period. This means that you have a good overview of your expenses, as the monthly benefit will remain the same until the entire loan is repaid. It can sometimes be an advantage (depending on your needs) with a long-term overview. It provides economic and mental stability. Instead, if you choose a floating-rate mortgage loan, this means that the interest rate will change during the loan period. In several cases it may be that one chooses a smaller period of eg 1, 3 or in some cases 5 years, where the interest rate stays together. Once this period has elapsed, the interest rate must be determined again according to the market rate.

How do I know which loan union is best for me?

It may be difficult to find out both which loan association or type of loan is best for you. The best thing you can do is sit down and plan carefully what you need to spend your money on and a statement of your income and expenses for the same period. When you have a better idea of ​​what your borrowing requirement is going to be, it is easier for you to contact the different loan unions with specific proposals. Therefore, conversations can start where you find out if you can meet and reach agreement. If you contact as many loan associations as possible, you will also be able to get a quick overview of who can give you the best deal.

We will always think that you are wise to accept the guidance and advice that the various mortgage banks could give you. It may well lead you to make changes to the original plan after the first meetings, but ultimately will have a better and more realistic view of your options.