Understanding Mortgage Debt
Mortgages Payable or called Mortgages Payable is a long-term debt with fixed assets or assets as collateral (for example: land, buildings, houses) accompanied by a written agreement and proof of a deed of agreement by a notary. In Indonesia, mortgage debt provisions are regulated in the Civil Code Articles 1162-1232. So this mortgage debt has received legal and regulatory guarantees that must be carried out in accordance with the laws that have been set.
The agreement contains several things which include: the nominal amount of the loan, interest rate and interest payments, the term of the loan, the amount of installments to be paid and also the guarantee submitted (can be in the form of a land certificate or land deed).
Examples of goods that can be used as collateral for mortgage debt are immovable goods, such as land, buildings, and others.
By knowing this understanding, we can know that if the borrower is unable to pay off his debt within the stipulated time or at maturity, the lender has the right to confiscate or sell the fixed assets that are collateral. By selling the fixed goods or collateral in order to get funds to pay off debts that have not been paid. Mortgage debt is usually only obtained from one source, for example by borrowing mortgage debt from banks. So the mortgage debt is only at one source.
How much Mortgage Debt can be obtained?
In a mortgage loan agreement, it is stated that the borrower’s wealth is used as collateral, so that the bank can calculate how much funds can be obtained according to goods or permanent guarantees from the borrower.
Then the amount of mortgage debt funds is also usually borrowed from only one source, for example from the borrower to the bank. In practice, bank credit guaranteed by immovable property is an example of mortgage debt that is often found in the community. With only sourced from one party only, the accounting for this mortgage debt is relatively simple.
Procedure in procuring Mortgage Debt
1. In mortgage debt there must be a written agreement signed and registered with a notary. So that the debt agreement is legally protected by a legal entity.
2. In the procurement of mortgage debt, the borrower must have immovable property as collateral for the debt.
Mortgage Debt Rights
Mortgage debt rights are essentially indivisible over all immovable property that is bound to each and every part of the property. The immovable property will continue to bear the burden of the mortgage debt even though the collateralized item changes hands to anyone.
Advantages of mortgage debt
Mortgage debt can reduce the tax burden. Usually mortgage debt is used by a company so the tax burden is smaller than without mortgage debt. Another case example, suppose a company wants to buy an asset in the form of a building, then using a mortgage debt from a bank is more profitable than buying cash using the company’s own cash. That way the mortgage debt will generate interest which can reduce the tax burden itself. With a company’s mortgage debt, it can also be easier to plan its cash flow.
The lender or creditor does not have anything to regulate or intervene in the company. So, mortgage debt creates a relationship between the company and the lender, such as a bank, so the bank has no right to intervene or dictate the company’s policies and business strategies.
Borrowers of mortgage debt can still use goods that are used as collateral for debt. The company or person can still use it so that the mortgage debt does not interfere with the company’s operations and performance.
Although it has several advantages, mortgage debt also has disadvantages.
Mortgage debt disadvantages
Mortgage debt is expensive.
The cost of mortgage debt itself is quite expensive, the costs that must be incurred include notary fees, administration of insurance premiums to costs for the valuation of fixed assets to be guaranteed (appraisal). If accumulated as a whole, mortgage loan financing may exceed the value of the fixed assets guaranteed. Because all costs such as administration and others are borne by the borrower or the borrowing company.
The company has limitations in using the assets pledged as collateral. Indeed, the company can still take advantage of the fixed assets that are guaranteed, but the company cannot rent or sell the assets because they are still in the status of collateral, even the company cannot change the shape of the fixed assets because it can affect its value.
Actually a mortgage itself is a debt or credit. The collateral for the mortgage is property or immovable property. So the mortgage debt itself has a meaning that confirms the debt or credit. Mortgage debt consists of the words debt and mortgage which have their own meaning. Debt can be interpreted as money that is the result of loans from other people, so there will be a relationship between creditors (people who lend) and debtors (borrowers). Mortgage itself means debt or credit provided with property collateral (in this case the rights) which are submitted to the lender.
From the two meanings above, it can be concluded that mortgage debt is a long-term loan provided with the delivery of collateral in the form of fixed assets agreed in a written agreement with a notary deed, in which the agreement includes the loan nominal, interest rate, period, amount of installments. , and guarantees submitted in detail. As a loan that is mutually agreed upon as collateral for immovable property or property, mortgage debt has important consequences to note. If the loan is not repaid when it is due, the lender has the right to confiscate or sell the property used as collateral.
Mortgage debt dynamics
As a product of banking, mortgage debt certainly has several advantages and disadvantages. For example, in its application, when a customer provides a house certificate as collateral, the customer can still live in the house while periodically paying the predetermined installments.
Because talking about debt, there must be interest rates. The bank that provides mortgage debt products usually provides several types of interest rates ranging from fixed interest rates or floating interest rates. Customers usually really crave mortgage debt such as mortgages with fixed interest so that they can ease their finances.
However, one problem can arise when mortgage debt products use floating interest rates. The meaning of the floating interest rate is the interest rate on the loan (mortgage debt) following the interest rate determined by the central bank. When the central bank decides to increase the interest rate, the interest rate on loans (mortgage debt) will also increase so that customers have to pay installments with a larger nominal than before.
However, when the central bank decides to lower interest rates, the interest rates on loans (mortgage debt) will also fall. As a result, customers will benefit from paying installments with a smaller nominal than before.