The regulation of the housing market
IN THIS article, we are going to have a look at a law that came into force in 2019 and which regulates the rules of the real estate market and in particular mortgages. The law aims to establish certain rules for the protection of individuals who are debtors, guarantors or guarantors of loans that are secured by mortgage or other real rights over real estate with a residential use or whose purpose is to acquire or retain property rights over land or real estate built or to be built.
There are a series of rules on transparency. The lender, intermediary or its designated representative must provide the borrower or potential borrower with a set of documents including clear and truthful information on the costs to be borne by the lender and those to be borne by the borrower at least ten calendar days before the contract is signed. The costs will be distributed as follows:
■ The costs of the valuation of the property shall be borne by the borrower and the management agency costs shall be borne by the lender (the bank).
■ The lender shall bear the cost of the notary fees for the mortgage loan deed and those of the copies shall be borne by the party requesting them.
■ The costs of registration of the charge in the land register shall be borne by the lender.
■ The payment of the transfer tax and stamp duty shall be made in accordance with the dispositions of the applicable tax regulations.
If an arrangement fee is agreed, it shall be payable only once and shall include all the costs of studying, processing or granting the loan or other similar costs inherent to the lender's activity in granting the loan. In the case of loans made in foreign currency, the arrangement fee shall also include any currency conversion fee for the initial disbursement of the loan. The borrower may at any time prior to the expiry of the agreed term repay all or part of the amount due in advance. The parties may agree on a period of prior notice that may not exceed one month.
When the borrower expresses his wish to repay all or part of the loan early, the lender shall provide him, within a maximum of three working days, in writing with the information necessary to assess this option. The said information shall at least quantify the consequences for the borrower of the total or partial discharge of his obligations before the termination of the loan agreement, clearly stating the considerations taken into account to draw it up. Such considerations must be reasonable and justifiable.
The borrower shall be entitled to a reduction of the total cost of the loan, including interest and costs for the remaining period until the termination of the loan. In particular, the insurance contract associated to the loan with regard to which the lender is the beneficiary will be terminated, unless the borrower expressly informs the insurance company of his wish for the insurance contract to remain in force and designates a new beneficiary for this purpose. The borrower is entitled to a refund of the part of the premium that has not been used up by the person who received it.
In the case of variable interest rate loan contracts, or in those variable tranches of any other loan, the parties may contractually establish a compensation or commission in favour of the lender in one of the following two mutually exclusive cases:
(a) in case of total or partial early repayment of the loan during the first 5 years of the term of the loan contract, compensation or a fee due to the lender may be established which may not exceed 0.15 per cent of the repaid capital; or
(b) in the event of early repayment of all or part of the loan during the first 3 years of the term of the loan agreement, a compensation or fee in favour of the lender may be set which may not exceed 0.25 per cent of the capital repaid.
In the case of fixed rate loan agreements or fixed tranches of any other loan, a compensation or fee in favour of the lender may be contractually established with the following limits: a) in the event of total or partial early repayment or amortisation of the loan during the first 10 years of the term of the loan agreement or from the day the fixed rate becomes applicable, a compensation may be established, with a limit of 2 per cent of the capital repaid in advance; and b) in the event of early repayment of all or part of the loan from the end of the period referred to in point (a) until the end of the term of the loan, a compensation or fee in favour of the lender may be established which may not exceed 1.5 per cent of the capital repaid in advance.