In the tangle of legal terms, technicalities and jargon that characterizes the world of mortgages, it is very possible that the unskilled user of this matter feels lost. But the purchase of a house is for many the most important investment of their life, and the proportions of the indebtedness they will face for years would justify the effort to understand the functioning of real estate credit through these words, whose meaning remains very often dark.
Beyond the most common, such as fee, TIN or TAE, four experts decipher 20 terms and expressions among the least obvious, in order to understand more thoroughly the mortgage loans and negotiate them with greater security.
Indebtedness capacity. "It is a fundamental condition when negotiating the mortgage," says Antonio Gallardo, finance expert at the iAhorro banking comparator. It is the maximum capital and the quota that the applicant of the mortgage can assume without jeopardizing its financial integrity. "This limit is between 30% and 35% of your monthly net income, taking into account not only the debt you assume with your mortgage, but also others you are facing," explains Gallardo. For example, if a couple has an income of 2,000 euros, their capacity of indebtedness will be about 700 euros per month.
Fipre and Fiper. In order to allow the user to make a comparison between different mortgages before opting for one of them, the law obliges the entities to deliver the information in a standardized model called pre-contractual information file (Fipre). "This must contain clear and sufficient information of the product that it offers and of an advisory nature, and it must be available in all the commercialization channels of the entity, whether it be an office or on-line", Gallardo details. Once the bank has evaluated our needs and our financial situation, we will pass the personalized information form (Fiper). "This contains more accurate data on the cost and conditions of the product", highlights this expert.
Binding offer. "If the Fiper does not contain any obligation for the financial entity, the binding offer does," Gallardo points out. This document details the financial conditions of the mortgage, which the bank can not modify for 14 days after its delivery. The binding offer must be delivered to the user at least 10 days before the signature of the mortgage before the notary.
Bonuses The bank can "discount the mortgage", that is, lower the differential that is added to the variable interest rate index (such as the Euribor), when the mortgagee contracts some products linked to his loan. "It is a common practice, and sometimes it has positive consequences in the price of the mortgage, but it is important to verify if the differential is conditioned to the validity of the contracts in question, in which case it is necessary to bear in mind that the cancellation of some of the they will increase the quota, "says Silvina Palacios, an attorney with the Sanahuja Miranda law firm. And the general director of BGestión Global, Mercedes Blanco, adds that "mortgages offered at fixed rates can also have bonuses." In this case, the interest rate is directly reduced.
IRPH. "The Mortgage Loan Reference Index is used similarly to the Euribor, to calculate the variable interest rate of the mortgages, and represents the average interest rate of the mortgage loans granted," says the director of mortgages of the bank comparator iAhorro , Manuel Gonzalvez. Therefore, if many loans with high interest are granted, the IRPH grows. Its use was generalized in 2006 and 2007 as a less volatile alternative to the Euribor, but a ruling of the Supreme Court also established that it is exempt from any type of transparency control and is easily manipulated by the entities. It is expected that this year the Court of Justice of the European Union (CJEU) will pronounce definitively on this matter, which affects 1.3 million people.
Rounding up clause. It is a provision whereby the interest rate was always rounded upwards to result in quarter points (0.25%), half points (0.50%) or whole points (1%). "A ruling of the Supreme Court of 2001 and Law 44/2002 declared this abusive clause abusive, so no mortgage contract should contain it," says Gonzalvez.
First temporary fraction. In variable-rate loans, a clause can be incorporated that contemplates the existence of a first period in which the agreed variable interest is not applied, but a fixed one, which is considerably higher. "This first temporary fraction is usually annual, but there are cases in which the bank extends it to, for example, the first five years, which considerably increases the cost of the loan", in the words of Palacios.
Lack. It is a period in which only interest is paid and capital is not amortized. Its maximum duration does not usually exceed 24 months. In this way, the mortgaged can face difficult financial times, without incurring a default. "As a counterpart, the loan will become more expensive, since the unpaid capital will be distributed in the following installments, so these will be higher and the interest cost will also rise," Gallardo emphasizes.
Remove. It is the agreement reached by the bank and mortgaged for the latter to return the first part of the debt, forgiving the rest and waiving their right to demand it. "The debt can be removed at the initiative of the debtor, the creditor, or both," says Blanco. "In this way, in cases of default by insolvency of the debtor, the creditor is guaranteed the collection of at least part of the debt," he adds.
Early expiration clause. It allows a credit institution to terminate the contract prior to the agreed term, due to the non-payment of one or more installments of the loan. The debtor must return the entire loan. "Although Supreme Court rulings have declared this clause null, especially when it is executed after only one month of delay, it has not yet been eliminated from our legislation, since an opinion from the CJEU is expected in this regard," says Gallardo. According to the new Real Estate Credit Law -whose approval in the Senate is scheduled for March- the default must be much higher to trigger the foreclosure.
Early repayment commission. "Banks can charge the amount of additional money they consider for the corresponding administrative procedures, and as compensation for what they fail to earn" in the event that the loan is canceled before the expiration date, "since they will not receive the interests of amortized capital ", explains Gonzalvez. "It is important to look at it," Palacios warns, "since when the loan is signed many times the possibility that it can be canceled in advance is not contemplated, so the clause goes unnoticed." This amount is regulated downwards in the new Real Estate Credit Law.
Subrogation clause. Appears especially when the property is purchased directly from the developer or builder, but is unusual among individuals. In the words of Palacios, replacing the mortgaged one implies that "all the provisions of the mortgage loan subscribed between the seller and the banking entity will be applicable to us as soon as we sign the subrogation, unless expressly stated otherwise". Consequently, when speaking of subrogation, the original loan must also be analyzed in detail. There are two types of mortgage subrogations: those of creditor and debtor. "Through the first, the loan is transferred to another financial institution; with the second, the owner of a mortgage is replaced by another who acquires the home and takes over the ownership of the loan, "explains Blanco.
Subrogation Commission. It is a commission or percentage charged by the bank to the user in case he chooses to change his mortgage to another financial institution. "It will be 0.5% during the first five years and 0.25% from the sixth," says Blanco.
Interest in delay. They are those that apply when the mortgaged person does not pay his installment on time. "The entities in recent years have set excessively high interest rates, which have been moderated through several judgments," Palacios said. Until the new Real Estate Credit Act comes into force, there is no rule that limits them, so this lawyer advises to pay attention to what is agreed on the matter.
Benefit of excursion. "It is the right of the person who undertakes to assume the mortgage debt of another -in the event that he does not do so- to oppose the execution of his assets, rendered in guarantee of the payment of the debt, until the Bank has not executed all the assets of the main debtor, "Blanco says.
Clips Mortgages (swaps). They were safe against increases in the variable rates of mortgages. They began to appear with certain frequency in the mortgages signed from the years 2008 and 2009, in which the Euribor was in ascent, although the forecasts pointed to a collapse that would not have taken long to manifest itself. "At the time, the mortgaged and the bank signed a contract for the client to cover their backs in the event that interest rates rise more than expected, "says Gonzalvez. This product, however, proved to be more complex than it might have seemed at first, which is why many mortgaged ended up paying more than necessary. Several judgments of courts knocked down these insurances.
Elevate to public deed. It is to record before a notary a certain fact or right. In the mortgage deed, a detailed description of the property to be transmitted must appear, as well as its registry status, that is, the information that indicates whether the property is free of charges or not. "These data are requested in a simple note that the notary asks the Land Registry, and that is attached to the public deed," says Gonzalvez.
Guarantee on first request. Although it is used more in rental contracts, before signing the sale of a home the bank can request the buyer a guarantee to grant the mortgage. It acts as a guarantee of payment independent of the mortgage contract signed by the parties. "It is not necessary to show default for the bank to execute this guarantee," says Gonzalvez.
Certificate of zero debt. It credits that the mortgage debt contracted with the bank already extinguished. The financial institution is requested and must be delivered to the Land Registry, to make the cancellation public. "Although registering this certificate is not mandatory, I recommend doing it because it can be useful, for example, when selling the house," says Gonzalvez.
Reverse mortgage. It is a loan aimed at people over 65 or dependents, with whom the value of the owner's home is converted into liquid money, without losing ownership. "It is a life annuity for the client, who offers his home as collateral", breaks Blanco down. "After his death will be his heirs, if they want to keep the house, those who are responsible for paying the amounts paid plus interest," he adds. If they did not want to keep it, the house would respond to the debt and the bank would keep it.