Types of bank guarantees – mortgage | By Stélio Tauzene, FNB Mozambique

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Types of bank guarantees – mortgage | By Stélio Tauzene, FNB Mozambique

7:00 CAT | 08 Nov 2024

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The process of analyzing a financing application often requires the applicant to present guarantees. The establishment of a mortgage is one of the most important and common bank guarantees in the Mozambican and international financial markets. Generally, mortgages are placed on real estate and moveable assets subject to register belonging to the client or third parties.

Mortgages are fundamental guarantees in the analysis and pre-approval of credit because they reduce credit risk, making it more attractive to the bank and resulting in lower applicable interest rates for the client. This type of guarantee is widely used due to its effectiveness and involves the use of real estate as collateral for the loan, benefiting both the client and the lender.

For the client, mortgages allow access to higher financing with lower interest rates, considering that real estate is seen as stable assets of significant value, reducing the financing risk. On the other hand, real estate offers greater flexibility and can be used as collateral for various loans. The establishment of voluntary mortgages is the most common, resulting from the will of the parties involved and can be formalized by contract or unilateral declaration of the owner. In the case of real estate, they must appear in a public deed, will, or authenticated private document. For movable assets, the written form is sufficient.

The registration of the mortgage is essential for the validity of the transaction. Only those who have legitimacy to sell the assets can establish the mortgage, usually the owner or an authorized third party. It is crucial that the mortgaged assets are described in detail; otherwise, the mortgage can be considered null.

The mortgaged asset does not make the creditor the owner of the asset, allowing the owner to establish other mortgages on the same asset with the consent of the primary creditor in case that there is an agreement in this regard between the parties. After signing the contracts, the mortgage must be registered with the corresponding registry office. In addition to real estate, mortgages can also be placed on movable assets equated to real estate, such as vehicles, ships, and aircraft. During the financing period, it is possible to reduce the mortgage if the value of the assets increases or if partial payments of the debt are made.

After fulfilling the guaranteed obligation, the mortgage is extinguished by release of mortgage. The creditor can renounce it explicitly, in a signed document, and this renunciation does not require the acceptance of the mortgage’s author to take effect.

By Stélio Tauzene, FNB Moçambique, SA

Source: FNB Mozambique /Media Release