What exactly is a mortgage loan and what can a bank do with it?



Mortgage loans are one of the most popular loan products in the country. For banks, mortgage collateral is certain and allows reducing the risk incurred when granting loans. What exactly is a mortgage?


The mortgage is a limited property right that allows to secure, among others repayment of credit obligation. It enables the bank to recover its debts effectively, first before other creditors if the borrower stops paying off the loan. 


What is a mortgage?

What is a mortgage?


The mortgage established on the property is collateral for the repayment of the loan commitment. Formally, it is a limited property right that gives the creditor security on property in the event of default. The mortgage is created when the relevant entry in the land and mortgage register of the property is made, and it expires with the payment of the liability. You can charge the mortgage with:

  • ownership of any property,
  • cooperative right to premises,
  • right to perpetual usufruct,
  • right to a single-family home.

A mortgage established for the bank is a solid security, and in the event of problems with the repayment of a given commitment, the bank will be able to recover the funds borrowed from the mortgage.


How can the bank use the mortgage?

How can the bank use the mortgage?

If the collateral for the mortgage payment is a mortgage on the property, it gives the bank priority over the borrower’s other creditors in pursuing their claims.


As a mortgage creditor, the bank even has the right to take the borrower’s real estate with a mortgage. However, before such a radical step occurs, he will first try to use other possibilities. Therefore, mortgage loans generally have more than one collateral that the bank can use in the event of default.


The bank will not become the owner of the property in the event of unreliable repayment, but the bailiff, acting on his behalf, starts the execution, also making an entry in the land and mortgage register. As a result, the property will be valued and put up for auction. From the funds obtained from the new buyer of the property, the bank will first satisfy its debts to the borrower’s other creditors. The rest of the funds, if something remains, will go to other entities and persons or to the client’s own hands.

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