OBTAINING INFORMATION
One of the first tips for people applying for a housing loan is to collect enough information on the both- the actual and the legal status of the real estate as well as general features regarding the method of financing the flat. Compare the different options to choose the most interesting offer that will meet our expectations.
The Bank of Spain emphasizes that a citizen must be aware of the obligations he assumes at the time of signing the loan agreement.
CREDIT CAPABILITY
After selecting the right property, you must consider the factors that affect the decision of granting a loan. The most important of them is the customer´s creditworthiness, i. e. the difference between their income and expenses.To calculate the creditworthiness, the bank requires not only the income information (after deduction of taxes and other receivables), but also the credit history of the client, which allows to make sure that other liabilities are repaid in a timely manner. In addition, it is necessary to assess the borrower´s ability to generate cash. For this purpose age, marital status, occupation, employment contract, previous cooperation with a selected financial institution, seniority and permanent address of registration, are taken into consideration.
MORTGAGE REGISTER
Although the property owners are obliged to present all the legal documents, it is recommended to obtain a current copy of the Land and Mortgage Register informing about the legal status of the property. This way, the buyer can personally check the condition of the property to make sure that the seller is the real and sole owner, and the property is free of any encumbrances or other irregularities that could lower its value.
LOAN PERIOD
After making sure that the property is free from tax burdens, it is time to set the date of transaction. This is closely related to the period of total return of the loan that has been agreed between the bank and the borrower. As mortgage loans are usually large amounts of money, the repayment period is considerably longer than in case of other financial operations.
Most often, the loan period varies from 15 to 30 years, or even more, depending on the interest rate.
COMIISSION AND OTHER COSTS
Another point worth mentioning when concluding a mortgage contract is a commission, i.e. a fee charged by the bank for providing the service and initiating the loan process. It includes processing the loan application, granting a loan, modification of the contract content or the possibility of an early repayment. The amount of costs is determined freely by financial institutions that are obliged to inform the customer about any fees imposed for services that will be provided to them.Most often, banks charge a commission for opening a mortgage loan, issuing bank checks or allowing the debtor´s name to be changed. In addition, the buyer of the property is obliged to cover the costs associated with the activation of the loan such as property valuation, insurance purchase, administrative fee, notary fee, write-offs and tax.
FINANCIAL CLAUSES
The Bank of Spain recommends that the documents of the loan agreement and the notary deed, under which the mortgage loan is formally granted, have financial clauses separated from the other ones. Their content should coincide with caculations that were prepared earlier in the so-called Personalized Infromation Sheet- Ficha de Informacion Pesonalizada (FIPER), or a document presenting a detailed loan offer for a specific borrower.
Financial clauses specify, among others, the applied interest rate on the loan, as well as impose on the bank to notify the client about changes related to the interest rate. Importantly, the remaining provisions of the contract can not disport the content of financial clauses to the deriment of the client.
SIGNING THE NOTARY ACT
The law mentions two conditions necessary to formalize the mortgage contract. One of them is a notarial deed, and the other, a mortgage entry in the land and mortgage register for the bank. The notarial provisions ensure that individuals have the right to choose freely a notary who, in the case of a real estate sale contract will be responsible for the performance of notarial duties.
