A mortgage is a loan secured by real estate companies that allows you to purchase your home. Banks, housing associations and other lenders offer these loans and usually require some form of collateral, such as your house.
Interest rates on mortgage loans are usually lower than those on consumer loans. You also usually have a longer mortgage repayment term. However, if you default, the lender can foreclose on your property and sell it to pay off the loan.
Banks can decide to accept or reject your mortgage loan application. However, the institution that intends to offer you a loan must first assess whether you are a good candidate for credit, which means: can you afford to take the loan?
Technically, you can get a mortgage loan from lenders based in other European countries. However, various factors such as your country of residence, place of work or even the location of the property can influence the lender’s decision.
Your awareness of credit scoring is key to maintaining a good credit score.
Before giving you a loan, banks will analyze your credit score to make sure you can repay the loan. The organization will assess the quality of your application based on several factors, some of which are listed below:
- Your financial condition, which includes your assets and liabilities
- The value of the secured property
The lender needs to know your income to assess whether you can repay the loan.
A mortgage lender will only offer you a loan if they think you are likely to repay it.
Often, mortgage loans are not granted for foreign properties or for persons whose residence or source of income is outside the country in which the bank resides. However, they cannot favor or disfavor EU citizens solely on the basis of their nationality.
If you think the bank has been unfair to you because of your nationality, you can:
- If your bank refuses a transaction, you have the right to request an official document explaining the reasons for the refusal.
- If your nationality is the only reason why you have been denied service and you need help, contact FIN-NET. They mediate disputes between consumers and financial service providers, such as banks.
Basic information for evaluating and comparing offers
Submitting multiple offers to different lenders will ensure you get the best mortgage possible. In addition, by law, if you make a binding offer to the creditor, they must provide you with the European Standardized Information Form (ESIF). The document below will allow you to understand the terms of the different mortgages. The ESIF contains the following information:
- The size of the amount you wish to borrow;
- Repayment period for the loan;
- The total amount to be paid;
- The type of interest rate will determine your monthly payment.
- The annual percentage rate (APR) is a number that shows the total cost of the loan in a year. You can use APR to compare different loan offers from different places;
- All expenses that are paid on a regular or one-time basis;
- Number, frequency and amount of payments;
- If you intend to pay off your loan ahead of schedule, here are some aspects you should know about the terms and fees;
- If you decide to borrow in a foreign currency: As an example, let’s look at how changes in the exchange rate can affect your mortgage loan.
ESIF makes it easy to compare offers from different lenders to choose the one that best suits your needs. If the lender hasn’t provided you with this form, ask for it.
1. Customers have a minimum of seven days to review the offer or reject the contract.
Under EU rules, the creditor or credit intermediary must give you at least seven days to assess the offer. In some EU countries, however, this term is longer.
The time required to process a credit application varies from country to country; it can be:
- The cooling-off period is a specified period in which you can consider whether the offer meets your needs;
- The term in which you can cancel the signed credit agreement;
- A combination of both.
2. Pay off your mortgage early by making early payments and saving on interest.
Take advantage if you can pay off some or all of your debt early! In this way, you will not accumulate more interest on unpaid debts and you may be able to conclude a new mortgage loan agreement with more favorable terms.
If you plan to pay off your mortgage loan early, there may be a possibility that the lender will ask for compensation depending on the rules in your country.
If applicable, this compensation must not exceed the amount the creditor has lost.
Factors to consider when getting a mortgage loan.
Compare different offers.
There are two types of mortgage loans: for business purposes and for personal use. Depending on the type of loan you intend to take out, the bank may or may not monitor how you spend the money:
Target mortgage loan – To approve this type of mortgage loan, the bank requires to know in advance how you plan to spend the money. These types of loans are usually used to: buy or build a property, make repairs or put the finishing touches on it, and use it to pay off other debts or to get a new loan with better terms.;
Non-targeted mortgage loan: Consumer credit is a type of credit where real estate is used as collateral. With this type of loan, the bank does not monitor how the borrower spends the money. It is essential to understand that the interest rates and repayment terms of general loans are usually worse than those of more specific mortgages. Although collateral is required, unsecured loans have more favorable terms for borrowers than unsecured consumer loans.
Mortgage loans are generally divided into two types: those secured by government securities and those that are not:
- Housing loan – in this case, the loan is granted for the purchase of the same property that serves as collateral.;
- Mortgage loan – for all other circumstances.
It is important to establish and maintain a good relationship with your bank.
Even though you are the one who needs the loan from the financial institution, you and the bank should have an equal relationship. You are obliged to ask for a loan that is profitable for you, not for the bank. The loan amount, interest rate and other details should be created with your personal needs in mind, not predetermined by the lender. You can also ask the bank to provide you with information about different offers so that you can compare them. In this way, you will be able to familiarize yourself with all the details, consider which options are best for you and make an informed choice.
The transaction must be notarized.
You must establish your mortgage through a notary for the transaction to be considered legal.
Be sure to check if the interest rate is fixed.
Choosing and applying for a mortgage loan can be complicated – there are many things to consider. One of the most important factors is definitely the type of interest rate. You can choose a fixed or floating interest rate. In general, fixed interest rates are higher than floating rates. However, they also provide greater security for the borrower, which some people say is worth it! A sudden rise in interest rates can save you a lot of money and stress if your mortgage is fixed rate. However, it is extremely important to remember that a fixed rate is only set for a fixed term, usually ten years or less, because it is difficult to know how the market will change over the long term.
Find out when the deadline is
By law, you are entitled to at least seven days to consider a mortgage offer. It is best to start preparing the loan formalities and negotiate with the seller until you make a decision. In this way, you can avoid possible discrepancies in the deadlines set by both parties – the bank and the seller. Remember that some of the documents required to finalize the loan may take some time, which can delay the process. To account for this possibility, it is best to sign a pre-contract with a duration of about 45 days so that you can act quickly if necessary.
Mortgage insurance, other services
Mortgage insurance protects you and your family if something happens that makes you unable to pay your debt, such as job loss or illness.
Your lender may require you to purchase mortgage insurance if you are financing your home with a loan.
He may offer you an insurance policy complete with the mortgage loan agreement, but this cannot be a condition of obtaining the loan.
If you find another insurance policy with better terms, you can switch to that provider as long as the level of coverage is equal to or greater than what the lender requires.
However, lenders may require you to open a checking or savings account to repay the loan. Some lenders require opening a checking or savings account to repay the loan.