What Real Estate Can Be Used as Collateral?

When substantial capital is needed for a major project or the purchase of a commercial property, standard consumer credit limits are not enough. Using your own property as collateral is one of the most effective ways to obtain a large amount of money for a long period on more favourable terms than unsecured loans. However, it is a serious commitment. I often see borrowers waste time offering banks illiquid properties. Let's take a detailed look at what real estate can become your financial leverage in 2026, what requirements lenders impose, and how to prepare your property for the transaction.

Simply put, a loan secured by real estate is a long-term borrowing instrument where your property serves as security for the financial institution. For a bank, having solid collateral significantly reduces the risk of non-repayment. That is why you may be offered terms that are unavailable with standard quick loans: a lower interest rate, a larger loan amount and a flexible repayment schedule over a longer period.

The logic is simple. After the mortgage agreement is signed, an encumbrance on the mortgaged property is registered in the State Register of Real Property Rights. This means that you remain the full owner of the property: you can continue living there, renovate it or use commercial premises for your business operations. However, your ownership rights become restricted — the property can only be transferred in accordance with the terms of the mortgage agreement and, as a rule, with the consent of the mortgagee. Once you fully repay the debt, all restrictions are removed through a notary.

In my experience, this financial instrument is ideal for those who have a clear financial plan and understand how they will repay the money but need significant funding right now.

In 2026, the banking system operates according to strict liquidity standards. This means that collateral must be property that can be quickly sold on the market without a significant loss in value in the worst-case scenario.

If you are assessing your assets, focus on three main categories for which it is generally easiest to obtain financing secured by real estate:

1. Apartments in multi-unit residential buildings (residential real estate). This is the most popular and straightforward type of property to approve. Banks are most willing to accept an apartment as collateral if it is located in a large city or regional centre, has reinforced concrete or mixed floors (not wooden) and is in a building that is not scheduled for demolition or reconstruction.
2. Private houses and cottages. Getting a loan secured by a house is entirely possible, but the requirements are stricter. The bank will assess not only the building itself but also the land on which it stands. The land must be privately owned, have a cadastral number and have the appropriate designated use (for the construction and maintenance of a residential house).
3. Commercial real estate. This includes office premises, retail spaces, warehouses and industrial properties. If you own such property as an individual or sole proprietor, it can also be used for financing. The main criteria are the property's commercial attractiveness and its ability to generate income.

I would like to emphasise the importance of location separately. In 2026, the geographical location of the property is a critical factor. Many banks restrict or do not provide loans secured by properties located in areas of active hostilities or territories with increased security risks. Specific requirements depend on the bank's lending policy. Preference is always given to properties in relatively safe areas with developed urban infrastructure.

Even if your apartment is worth millions on paper, there is a long list of technical and legal issues that can make a long-term loan secured by real estate unavailable. I recommend checking the property in advance for so-called red flags.

Here is a list of properties that financial institutions are likely to reject:

1. Real estate where minors are registered or have property rights. This situation does not always mean an automatic refusal, but it may complicate the process of registering the collateral. If a child is a co-owner of the property or their rights may be affected, permission from the guardianship and custody authority or other documents required by law may be necessary. If a minor is only registered at the apartment or house, the decision is made individually based on the bank's internal policy and the specific circumstances.
2. Properties with unauthorised alterations. If load-bearing walls have been removed, a room has been combined with a balcony, or a bathroom has been relocated without approval and without updating the technical passport, the bank may require you to legalise these changes first. Any discrepancy between the actual layout and the official documents can be grounds for refusal.
3. Unsafe housing and buildings from outdated housing stock. Barracks-style buildings, wooden structures, properties with significant wear or buildings officially recognised as unsafe are generally not suitable as collateral. Banks look 10–15 years ahead: will the property retain its value by the time the loan agreement expires?
4. Property with problematic documentation. This includes unresolved court disputes over ownership, undivided shares between heirs or other active encumbrances registered in state registers.

You should understand that your personal estimate of your property's value and the bank's assessment may differ significantly. Financial institutions do not simply take your word for it and do not rely on prices listed on property websites. A professional property valuation carried out by an independent accredited expert is a mandatory step.

During the inspection and analysis, the valuer considers the following factors:

• Exact location, attractiveness of the area and proximity to transport connections.
• Wall materials, year of construction and condition of the building's common areas.
• Quality of renovation and engineering systems (heating, electricity and plumbing).
• Floor level (ground and top floors are often valued lower).

Based on the assessment, the expert determines two figures: the market value of the property and its liquidation value. Liquidation value is the price at which the property can be sold quickly in the event of force majeure. As a rule, the liquidation value is lower than the market value, although the exact discount depends on the property's characteristics and the valuation methodology used.

The bank uses these calculations to determine the financing limit. At many banks, the loan amount is approximately 50–70% of the property's appraised value, although the exact percentage is determined by the bank's lending policy. For example, if your private house is valued at UAH 4,000,000, you may be able to receive a maximum of UAH 2,000,000–2,800,000. The remaining amount serves as a reserve buffer for the bank in case of market fluctuations.

Preparing the paperwork is a major part of the process. The more complete and well-organised your documents are, the faster the decision can be made. If you plan to apply, you will need to prepare two separate sets of documents: personal documents and property documents.

The borrower will need:

• Ukrainian citizen's passport and taxpayer identification number (RNOKPP).
• Official documents confirming your creditworthiness as a borrower (income statements for the last 6–12 months, tax returns for sole proprietors or bank account statements).

For the real estate, the bank may require:

• A document confirming ownership (sale and purchase agreement, gift agreement, certificate of inheritance, etc.).
• A recent extract from the State Register of Real Property Rights.
• Technical passport for the property.
• A document showing the persons registered at the property (an extract or certificate).
• An independent property valuation report.

Once all documents have been collected and checked by the legal department, the transaction is completed by a notary. The notary certifies the loan agreement and mortgage agreement and then makes the appropriate entry prohibiting the transfer of the property in the state register.

When you start analysing the market and looking for banks that offer loans secured by real estate on the best terms, you should assess not only the basic interest rate but also the associated costs. Arranging collateral always involves expenses that you have to pay out of pocket before receiving the funds.

Pay attention to the following key points:

• Upfront additional costs. Independent valuation services, notary services for registering the agreement, state fees and mandatory insurance of the collateral. Together, these expenses can amount to a significant percentage of the financing amount. Always include these costs in your initial budget.
• Insurance requirements. As a rule, the bank requires the mortgaged property to be insured against the risks of destruction or damage in accordance with the terms of the agreement. The bank may offer or include additional life or disability insurance for the borrower in the agreement. At the same time, insurance of the mortgaged property is required by law unless otherwise provided by the agreement.
• Early repayment penalties. Check the terms for early repayment of the loan, the procedure for making an early repayment and any possible fees if provided for in the agreement.
• The nature of the lender. I strongly recommend avoiding questionable private companies and unverified lenders that offer money within 15 minutes without proof of income. Very often, such companies use schemes where, instead of a collateral agreement, you are asked to sign a sale and purchase agreement with a right of repurchase. This is a direct path to losing your property. Work with licensed banks or financial companies supervised by the National Bank of Ukraine.

Remember that loans secured by real estate are a tool for growth, not a way to cover old debts. Carefully assess your monthly income, create a financial safety cushion covering at least 3–6 regular payments, and make decisions with a clear head. This way, your property can work towards your development while remaining protected.

Translation into English was created with the help of artificial intelligence.