A mortgage loan allows you to buy an apartment or house. Mortgages are provided by banks, credit unions and other credit institutions, and often the real estate itself serves as collateral for the loan.
In the case of a mortgage loan, the interest rate is generally lower and the repayment period longer than in the case of a consumer loan. However, if you fail to meet your repayment obligations and the mortgage collateral is on the property itself, the lending institution may seize and auction the property.
Banks are free to decide whether or not to accept your mortgage loan application. Before a mortgage lender offers you a mortgage, you need to check your creditworthiness.
Whether your financial situation allows you to borrow
In principle, you have the right to borrow a mortgage from a financial institution domiciled in another EU country. However, it cannot be ruled out that the lending institution will consider your country of residence or place of work when considering your application.
Therefore, you should be aware of the criteria that the lending institution will use to assess your creditworthiness. It is advisable to carefully study and compare the mortgage loan schemes offered by different lending institutions.
Before offering you a loan, the lending institution should check whether you are creditworthy. You will decide this primarily based on the following criteria:
- your financial situation (assets, debts, etc.),
- the value of the property you intend to mortgage.
Therefore, the bank will ask you for a proof of income, since your income is decisive in determining whether you will be able to repay your loan.
The financial institution can offer you a mortgage only if you are able to repay the loan based on the results of the investigation.
If you believe that you have been discriminated against solely on the basis of your nationality, you can do the following: Contact the lending institution (its complaint department) or ask the bank for a written explanation as to why you rejected the mortgage application; if the refusal is based solely on your nationality, you should consult the FIN-NET financial dispute resolution network for out-of-court settlement of cross-border disputes between consumers and financial services providers (eg banks).
The Single European Data Sheet shall contain the following information:
- the amount of the loan;
- maturity of the loan;
- the type of interest rate;
- the total amount to be reimbursed;
- Total Borrowing Rate (APR): Displays the total cost of borrowing with a single number. The total cost of the loan is expressed as a percentage of the loan amount to be repaid annually. THM helps you compare different offers;
- any charges payable on a regular or ad-hoc basis;
- the number, frequency and extent of the installments;
- information on the terms of the prepayment and the fees you will have to pay if you decide to repay the loan earlier than agreed;
- if you are borrowing in a foreign currency: Here are some examples of how the exchange rate can affect your mortgage loan.
The single European datasheet also allows you to compare offers from different lenders and choose the one that suits you best. If the creditor has not provided you with the Single European Data Sheet, you have the right to ask for it.
Under EU rules, the lending institution or credit intermediary must give you at least 7 days to evaluate the offer. In some EU countries, the law provides for a longer period. Depending on where you apply for the loan, this period can be: a reflection period during which you can consider whether the offer is right for you; withdrawal period within which you can change your mind and cancel a loan agreement that you have already signed; a combination of the two.
Early repayment of the mortgage loan
You generally have the option to repay all or part of your borrowed loan before the contractual repayment deadline. Early repayment allows you to reduce the amount of interest payable or to enter into a new, more favorable mortgage agreement with another credit institution. The law of each country governs whether or not a lender will be able to claim compensation if you repay the mortgage earlier than specified in the agreement. However, the compensation payable shall in no case exceed the financial loss of the lender from the early repayment.
Mortgage insurance, other services
Mortgage insurance can come in handy if you are faced with circumstances that prevent you from paying off your debt, such as death, illness or job loss. Lending institutions may require you to take out mortgage insurance. Sometimes the lender will offer you insurance along with the mortgage agreement, but you may not make use of the latter as a prerequisite for the contract. In any case, you have the right to choose from offers from other insurers – but wherever you take out insurance, the insurance coverage must be equivalent to what the lender requires. However, the lender may make it a condition for you to open a checking or savings account with which you will need to transfer the installments.