A mortgage is usually a loan for the purchase of a property. It allows people to fulfil their dream of owning their own home without having to save millions. However, you may also come across a no-purpose mortgage, also known as an American mortgage.
What is a non-purpose mortgage?
When we say mortgage, we mean a long-term loan secured by a lien on a property. However, while a conventional mortgage can only be used in connection with the purchase of your own home, a non-purpose mortgage can be used for anything.
Did you know that with a non-purpose mortgage you do not document what the funds are used for? The bank sends it to your checking account and you can use it as you see fit.
What are the rules for a non-purpose mortgage?
- Only a natural person who provides the bank with the required documents can apply for a non-purpose mortgage.
- You can take out a non-purpose mortgage for 1 year up to 20 years.
- You must repay the mortgage by the time you, as the applicant, reach the age of 65.
- With some banks, you can pay it off early without a fee.
- Compared to a conventional mortgage, you can expect a higher interest rate, but often lower than for a conventional consumer loan.