Mortgage loan – additional products requiredOn September 16, 2019 by DAVID SWANSON
Products added by banks to mortgage loans often raise customers’ doubts. It is worth considering the legitimacy of using them before signing the contract. We checked whether expanding cooperation with the bank is always the most cost-effective solution.
According to the AMRON-SARFiN report for the third quarter of 2018, the mortgage market is experiencing a real rebirth. Despite the more rigorous approach to the issue of lending alone and the difficulties related to the entry into force of the amendment to the Mortgage Credit Act, in the first three quarters of the current year, values in the range of 85-90% of results from the previous year were achieved. For the first time in eight years, and thus from the outbreak of the financial crisis, banks will exceed the threshold of 200,000. mortgage loans with a total value of over PLN 50 billion.
Mortgage – new rules
On 22 July 2017, the Mortgage Loan Act became effective. Its shape can be satisfied mainly by consumers. The law now forces the institutions to prepare clear and understandable offers. Customers must receive clear information about the contract period, the total amount of the loan, its costs and the interest rate.
The bank has 21 days to issue a decision (from the moment of submitting the set of documents), and in the case of refusal, it must provide adequate justification. A sense of security increases the possibility of withdrawing from the contract within 14 days of signing.
Debt in the currency in which you earn
Under the new regulations, a mortgage will only be obtained in the currency in which you receive the majority of your income. There have also been significant changes in the repayment of the loan – now customers can pay off its whole or part at any time during the term of the contract . Anyone can also apply for determining the costs of early repayment. However, the amount of such a fee must be proportional to the period for which the contract has been shortened.
Cross selling on a leash
Significant changes have also occurred in the area of combined sales, ie cross-selling. Admittedly, the law allows you to offer additional products , but prohibits the making of a loan from becoming dependent on having to use one of them. Banks should prepare two independent offers and give the customer the choice of whether he will decide on additional options. This regulation does not apply only to a free account used to service a liability.
The issue of additional insurance raises the consternation of the majority of borrowers. Before the amendment of the mortgage loan act came into force, these objections were fully justified. Institutions often made receiving a positive decision from buying, for example, life insurance. At present, the bank may, in accordance with the KNF’s recommendations, only require the purchase of real estate insurance. Other insurance policies are voluntary and it is the customer’s responsibility if their choice is justified.
The use of such a possibility results in lowering the loan margin, so in many cases the choice of such option may be made by pure economy. The total insurance costs depend on, among others from the amount requested, the state of health and the balance of the debt on the date of payment of the installment. The law also provides for cases in which the bank may require the customer to conclude this type of insurance contract: this may be especially the case for persons making an undertaking independently . If the borrowers are more, but the differences in their earnings are significant, the institution may demand the conclusion of such a contract from a better-earning person.
Many borrowers also wonder about the cost-effectiveness of buying additional protection insurance. As in the case of life insurance, they have an impact on the value of the loan installment , so they can be a good way to reduce the costs incurred. In any case, however, it is worthwhile to lean over prepared lists.
They should also be interested in people who foresee a lack of continuity of employment in the future, eg due to market instability. The scope of insurance depends on the chosen option, it can protect against problems with settling liabilities in the event of hospitalization, loss of job or loss of the ability to perform it.
Another product that banks are happy to add to the mortgage offer are credit cards . Currently, the issue of using this product may not be mandatory, however, as in the case of insurance, it may reduce the value of the monthly installment. It should be remembered that handling credit cards is a source of additional burdens , and the lack of regular repayments can be very expensive. The final decision should therefore be preceded by a reliable calculation of the profitability of such a solution.
Bank granting the loan
Prior to the amendment to the act, many banks treated the creation of a savings and settlement account as a requirement to obtain a loan. In some cases, customers were also required to remit to this account or transfer a certain amount of money. Currently, it is one of the options that can make the loan price more attractive. It should be remembered that the account management fee will be charged to our budget in the perspective of up to several decades. It is worth taking this into account when assessing the profitability of expanding cooperation with the bank.
Additional products – banks’ way to retain customers
Mortgage offers proposed by banks are very similar to the additional products offered. Financial institutions, wanting to retain a new client, strive to sell a wide range of complementary instruments . Their use may, on the one hand, reduce the cost of credit, and on the other, they generate additional burdens for the borrower throughout the financing period. It is worth remembering this before signing a loan agreement.