What you should consider when choosing a mortgage loan
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Loan agreements are often difficult to understand. This is partly due to the need to use technical terms which cannot be substituted. It is advisable to obtain the text of the contract in advance of the signing, especially the "general conditions" proposed by the bank.
If there are difficulties in comprehension and the response from the bank is not satisfactory, the question can be addressed to our firm, who can explain the terminology even before the loan is agreed.
This is generally the main or exclusive element in the consideration of a loan. However it is important to examine other factors, listed below, before making a choice, as it is essential to calculate the total effect of repayments on the family budget.
It is therefore important to look at the difference between the initial rate and the operational rate, as well as the difference between fixed rates and index-linked rates, as for example a fixed rate which looks good today may become expensive in the near future. Moreover, in the calculation of the monthly repayments, additional costs are added to the interest, and it is useful to know about these in advance.
It is appropriate to examine carefully the interest on the loan, appraisal and preliminary costs, and the cost of the insurance with which the bank covers itself against the risk of fire or explosion in the property or the death of the borrower. It is also a good idea to be aware in advance of the notarial fees which, for various reasons, may vary according to the sum borrowed.
When a buyer makes a commitment to the purchase of a house by a certain date and must pay a penalty for late payment, prolonged processing times before the loan is approved can be expensive. It is advisable to check with the bank about the timing required.
Although a person applying for a loan does not envisage the situation of being unable to make repayments on time, this eventuality must be carefully considered, to avoid unfavourable or unexpected situations leading to dangerous chain effects.
Since the mortgage agreement exists only when the notary has registered it at the appropriate office, and this registration may happen after the signing of the loan agreement, the bank often retains the sum of the loan until the paperwork is completed, which means a delay of two to three weeks before the money loaned is made available. In the case of a property purchase, the seller must therefore wait for this period of time before receiving payment.
It is essential to clarify with the bank and our firm the timings of availability of the money. It will be our task to propose and explain the various options to both parties.
The law allows a portion of passive interest and accessory fees to be tax-deductible when they are paid on mortgage loans specifically for the acquisition of property and/or rehabilitation of buildings. This possibility of tax deduction therefore deserves careful attention.
The mortgage is the guarantee which allows the bank to forcibly recuperate its credit when a debtor does not pay. To the main debt (the capital), additional costs are added: the interest established for the loan, late payment fees and costs for the eventual sale of the house by auction. This is why the mortgage is drawn up for a substantially higher amount than the loan.
The loan is paid off when the final payment is made. The mortgage which guarantees the loan, however, remains standing until twenty years have passed since it was set up, technically from the date it was granted. For loans lasting less than twenty years, then, there is an interim period when the mortgage exists even though it is no longer useful.
When considering a loan application, the bank must take into account not only the value of the house but also the borrower's ability to meet the repayments. For this reason, the bank sometimes asks for the loan to be guaranteed by a third party (for example a parent for a child). This procedure is acceptable as long as the sum and the duration of the guarantee are stated