For those who need to apply for a real estate loan

For those who need to apply for a real estate loan

1. The clarity of the contract
2. The rate
3. The incidental expenses
4. The investigation time
5. The default rate for late payment. Clarity of the contract

It is also necessary to know

1. The modes of delivery
2. Tax deductibility
3. The amount of the mortgage
4. The method of mortgage cancellation
5. The limits to the ability to sell
6. The additional collateral required by the bank

Focus on

1. Renegotiation
2. The vexatious 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 irreplaceable technical terms; partly, however, the problem could be overcome by a simplification effort that would ensure a clearer relationship between banks and users. It is advisable to have in advance the text of the contract and, especially, of the "general conditions" proposed by the bank.

 

If you encounter difficulties in understanding and if the answers given by officials are not satisfactory you can turn either to consumer associations or to the Notary Public, who will give the appropriate explanations even before the mortgage is concluded. The lack of clarity in the contract may also be an indication of poor quality of the product, the something makes it advisable to turn to another lending institution.

The rate

It is generally the main or exclusive element in evaluating a mortgage. On the other hand, it is important to investigate other factors, listed below, before making the choice, as it is appropriate to assess the overall burden that mortgage payments will have on the family budget. Therefore, it is necessary to inquire about the difference between the entry rate, which is lower for the first six months, and the going rate, as well as to evaluate the difference between a fixed rate and an indexed rate, since, for example, a low entry rate can be attractive but reserve the unwelcome surprise of very high going rates, while a fixed rate that is convenient today can become burdensome in a short time. In addition, in forming the monthly installment, other expenses are added to the interest rate that you need to know about in good time.

The incidental expenses

Here one can find unpleasant surprises in terms of economic charges; therefore, it is advisable to carefully examine and compare mortgage fees, appraisal and investigation fees, and insurances - more or less imposed - with which the bank guarantees itself against the risk of fire/breakdown of the property or death of the borrower. It is also a good idea to inquire in advance about notary fees, which, for various reasons, may vary for the same loan amount.

The investigation time

When you have committed to buy a house within a given time frame and have to pay a penalty to the seller for the delay, long mortgage loan processing times can cost you dearly. As a rule, 60 days is more than enough time to obtain a mortgage loan.

The default rate for late payment. Clarity of the contract

Although mortgage applicants do not think they will come to find themselves in a position where they cannot pay their installments on time, it is necessary to consider this eventuality carefully as well to prevent unfavorable and unforeseen circumstances from producing dangerous ripple effects.

It is also necessary to know

The modes of delivery

Since the mortgage exists only from the moment that notaio registers it in the appropriate office, and this can be done only after the mortgage is taken out, the bank often withholds the borrowed sum until the paperwork is completed, which means having to wait two or three weeks before the borrowed money is available. In the case of a real estate purchase and sale, the seller will consequently have to wait a few days to get paid.

 

One must inquire at the bank and at notaio about the time when the money will actually be available. To avoid this wait, some banks make the borrowed sum available immediately as pre-financing, in which case it is worth checking what interest the bank requires. As an alternative to pre-financing, it is necessary to make arrangements in advance with the seller who, if he sells before collecting the full price, must be properly guaranteed. It is the task of notaio to propose and explain to the parties the various possible solutions.

Tax deductibility

The law provides for the tax deductibility of a portion of the interest expense and related ancillary charges paid on mortgages taken out for the purchase of real estate and/or for building renovation work. This possibility of abatement of the tax burden should therefore possibly be examined carefully.

The amount of the mortgage

The mortgage is the security that allows the bank to forcibly recover its debt when the debtor fails to pay. To the main debt (principal) must be added the interest established for the mortgage, the interest for delay, and the costs of the procedure for the auction sale of the house. For this reason, the mortgage is registered for an amount much higher than that of the mortgage. This means that up to that amount the value of the house is reserved for the bank, and that any other mortgage-which, however, banks do not always grant-can only be claimed on the residual value of the property.

The method of mortgage cancellation

The mortgage is extinguished with the payment of the last installment. The mortgage securing it, on the other hand, remains in existence until twenty years have passed since it was established, in practice since the mortgage was granted. For mortgages with a term of less than twenty years, therefore, there is a period of time when the mortgage exists even though it no longer has any use. In these cases, it is not convenient to ask the bank to cancel the mortgage unless you have to sell the house. It should be remembered that the cancellation of a mortgage always takes a few months and its cost is not negligible (about 500 € for a mortgage of 160,000 €).

The limits to the ability to sell

Some mortgage contracts stipulate that you cannot sell the house before you have finished paying off the mortgage, obliging you otherwise to pay off the debt early and thus also face any penalty. Such clauses should not be underestimated because they can create a serious hindrance when you want to move house. Not all banks impose them: one can ask for them to be removed or change banks. In any case, the ban on selling the house should be contained within reasonable time limits (e.g., five years).

The additional collateral required by the bank

In granting a mortgage, the bank must assess not only the value of the home offered as collateral, but also the borrower's ability to pay the mortgage payments. For this reason, a surety from a third party (such as from a parent for a child) is sometimes required. This banking practice is proper as long as the amount and duration limits of the surety are determined. On the other hand, it is to be rejected if the bank (more often financial institutions follow this practice) asks for a power of attorney to sell the house in case the mortgage payments are not paid.

The limits to the ability to sell

Some mortgage contracts stipulate that you cannot sell the house before you have finished paying off the mortgage, obliging you otherwise to pay off the debt early and thus also face any penalty. Such clauses should not be underestimated because they can create a serious hindrance when you want to move house. Not all banks impose them: one can ask for them to be removed or change banks. In any case, the ban on selling the house should be contained within reasonable time limits (e.g., five years).

Focus on

Renegotiation

Renegotiation can be considered a generally used achievement, but it depends on the will of the parties (bank and borrower). Renegotiation may relate only to the rate or term, or it may involve closing the old mortgage and opening a new one with the resulting costs, which must be carefully weighed against the benefit of lower interest rates.

The vexatious clauses

The abuses sometimes suffered by consumers when taking out a mortgage to purchase a property, such as very onerous penalties in the event of early repayment, limits on the right to sell the mortgaged property by transferring the mortgage to a third party, can now also be combated thanks to the new regulation of unfair terms. It is precisely unfair vexatious clauses that have been one of the most problematic aspects on which the Italian Banking Association and the consumer associations that are signatories to this Vademecum have intervened, in redefining the right balance of rights-duties between customer and bank. First and foremost, the user must expect that the contract terms proposed by the bank are always understandable and communicated to him or her sufficiently in advance. If certain terms of the contract result in an imbalance of rights and obligations for the consumer, the same may be automatically deemed ineffective. Consumer advocacy associations can sue lending institutions that use unfair general terms and conditions and ask the court to prohibit their use.

Consultants and intermediaries

Applying for and obtaining a home loan today is within everyone's reach. It is normally sufficient to approach a bank and produce the few documents it asks for. Therefore, significant rates sometimes requested by "financial brokers" are not justified. Those who apply for a mortgage and need clarification always have at their disposal the consumer associations and notaio, an impartial professional, whose choice is up to the borrower and whose intervention, necessary for the establishment of the mortgage, represents a cost that can best be used to get all the necessary advice.