What to do for a real estate mortgage

What should be evaluated when choosing a mortgage

  1. The clarity of the contract
  2. The rate
  3. The accessory costs
  4. The time needed for processing the loan application
  5. The late payment rate Clarity of the contract

 

It is also necessary to know

  1. The payment methods
  2. The tax deductibility
  3. The amount of the mortgage
  4. The procedures for canceling the mortgage
  5. The limits on the right to sell
  6. The additional guarantees required by the bank

 

Focus on...

  1. The renegotiation
  2. Unconscionable clauses
  3. Consultants and intermediaries

 

The clarity of the contract

Mortgage contracts are often difficult to understand. This is partly due to the need to use precise technical terms; in part, however, the problem could be solved with a simplification effort that would ensure a clearer relationship between banks and users. It is advisable to see in advance the text of the contract and, above all, of the "general conditions" proposed by the bank.

If you have difficulty understanding and if the answers provided by the officials are not satisfactory, you can contact a consumer associations and/or the notary, who will explain the case before the mortgage is signed. The lack of clarity of the contract can also be a sign of poor quality of the product, which makes it advisable to contact another bank.

 

 

The rate

It is generally the main or exclusive element in the evaluation of a mortgage. However, it is important to also examine other factors, listed below, before making the choice, as it is appropriate to evaluate the overall burden that the loan installments will have on the family budget.

It is therefore necessary to inquire about the difference between the entry rate, which is lower for the first six months, and the full rate, as well as assess the difference between a fixed rate and an indexed rate. For example, a low entry rate may be tempting but you might have the unpleasant surprise of very high full rates, while a fixed rate that is convenient today could soon become burdensome. Moreover, in addition to the interest rate, the monthly payment includes other expenses that it is necessary to know in good time.

 

The accessory costs

Here you can have unpleasant surprises in terms of economic burdens; it is therefore advisable to examine carefully and compare the taxes on the loan, the costs of appraisal and loan processing, the insurance - mandatory or otherwise - with which the bank is guaranteed against the risk of fire/burst of the building or death of the borrower. It is also good to inquire beforehand about the notary fees that, for different reasons, may vary with the amount borrowed being the same.

 

The time needed for processing the loan application

When you have committed to buying a house within a given time and you must pay a penalty to the seller for the delay, lengthy loan processing times can be quite costly. As a rule, 60 days are more than enough to get a mortgage loan.

 

The late payment rate Clarity of the contract

Even if those who apply for a mortgage do not think of being in the condition of not being able to pay the installments on time, it is necessary to carefully evaluate this possibility in order to prevent any unfavorable and unforeseen circumstances from producing dangerous knock-on effects.

 

It is also necessary to know...

The payment methods

Since the mortgage only exists from the moment the notary files it with the appropriate office, and this can only be done after the conclusion of the loan, the bank often retains the loaned sum until the procedure has been completed, which means having to wait two or three weeks before you can obtain the borrowed money. In the case of a real estate purchase, the seller will have to wait a few days to get paid.

It is necessary to inquire at the bank and at the notary about the timeframe within which the money will be actually available. To avoid this waiting time, some banks make immediately available the borrowed sum as a pre-financing transaction, in which case it is advisable to check the interest rate that the bank requires. As an alternative to pre-financing, it is necessary to agree in advance with the seller who, if he/she sells before collecting the entire price must be appropriately guaranteed. It is the task of the notary to propose and explain to the parties the different possible solutions.

 

The tax deductibility

The law provides for the tax deductibility of a portion of the interest expense and related ancillary costs, paid for mortgages related to the purchase of property and /or to building recovery interventions. This possibility of reducing the tax burden should therefore be examined carefully.

 

The amount of the mortgage

The mortgage is the guarantee that allows the bank to forcibly recover its credit when the debtor does not pay it back. In this case, the overall debt will include the capital, the interest rate established for the loan, the late payment rates and the costs of the procedure for auctioning the house. For this reason, the mortgage is registered for a much higher amount than the loan. This means that up to that amount the value of the house is reserved to the bank and that any other mortgage - which, however, the banks do not always grant - may be requested only on the residual value of the property.

 

The procedures for canceling the mortgage

The loan expires with the payment of the last installment. The mortgage that guarantees it, however, remains alive until twenty years have elapsed since its establishment, i.e. since the loan was granted. For mortgages of less than twenty years, therefore, there is a period of time in which the mortgage still exists even if it no longer has any use.

In these cases it is not advisable to ask the bank to cancel the mortgage unless the house is to be sold. It is good to remember that the cancellation of a mortgage always takes a few months and that its cost is not negligible (about € 500 for a mortgage of € 160,000).

 

The limits on the right to sell

Some mortgage contracts stipulate that the user cannot sell the house before he/she has finished paying the loan, obliging him to pay off the debt early in case of sale and therefore paying any applicable penalties. Clauses of this type should not be underestimated, because they can create a serious obstacle when you want to change your house. Not all banks impose them: you can ask for their suppression or change bank. In any case, the prohibition to sell the house have reasonable time limits (for example five years).

 

The additional guarantees required by the bank

When granting a loan, the bank must assess not only the value of the house offered as collateral, but also the debtor's ability to pay the mortgage installments. For this reason, sometimes a surety is requested from a third party (for example by a parent for the child). This banking practice is correct, provided that the amount limits and the duration of the guarantee are determined. On the other hand, the bank’s request (more often financial companies follow this practice) of a power of attorney to sell the house if the mortgage payments are not paid should be rejected.

 

Focus on...

The renegotiation

The renegotiation can be considered a general conquest, but it depends on the will of the parties (bank and borrower).

The renegotiation can only be related to the rate or duration, i.e. entail the closure of the old mortgage and the opening of a new one with the consequent costs, which must be carefully assessed with respect to the advantage of the interest reduction.

 

 

Unconscionable clauses

The abuses sometimes suffered by consumers in taking out a mortgage for the purchase of a property, such as very expensive penalties in the event of early repayment, or limits on the ability to sell the mortgaged property by transferring the mortgage to third parties, can now be objected to thanks to the new regulation regarding unfair clauses.

Precisely the unfair-unconscionable clauses were one of the most problematic aspects on which the Italian Banking Association and the consumer associations intervened by signing this Vademecum, redefining the right balance of rights-duties between client and bank.

The user must first demand the contractual clauses proposed by the bank to be always comprehensible and communicated sufficiently in advance.

If some of the terms of the contract result in an imbalance between consumer's rights and obligations, the same can be automatically considered ineffective. Consumer advocacy associations can sue credit institutions that use general unfair contract conditions and ask the court to prohibit their use.

 

Consultants and intermediaries

Asking for and obtaining a loan for purchasing a home today is an operation that everyone can carry out. It is normally sufficient to contact a bank and produce the few documents it requests. Therefore, significant percentages that are sometimes required by "financial mediators" are not justified.

Who asks for a mortgage and needs clarification, has always-available consumer associations and the notary, impartial professional, the selection of which is up to the borrower and whose intervention, necessary for the establishment of the mortgage, is an expense that can be used the best way possible to receive all the necessary advice.