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Mortgage Loan Agreement, How it Works?

Mortgage Loan Agreement, How it Works? - The decree of the Ministry of Economic Development relating to the mortgage life loan, which, after a long process, will officially come into force on 2 March, was published in the Official Journal 38 of 16 February 2016. Let's see how the contract intended to replace the naked property will work.

Mortgage Loan Agreement, How it Works?

Pre-Contractual Documents

The decree defines what pre-contractual documents must be that the lender must hand over to the applicant. These are the same as for mortgages, as defined by the Transparency Provisions of Banking and Financial Services and Operations. The correctness of the relations between intermediaries and customers of the Bank of Italy. The lender also has the obligation to hand over a clear prospectus to the applicant free of charge, at least 15 days before the contract is concluded:

  • The amount financed with the corresponding indication of the percentage of the value of the property given in guarantee.
  • The indication of the amount that will be paid to the person financed after tax and all costs related to the financing, including those of investigation, notary, estimation assessment and insurance policy.

There are also two simplification prospectuses in the mortgage loan financing agreement, called amortisation plan simulation that illustrates the possible performance of debt over time, separately highlighting capital and interest.

  1. Applies the contractual rate at the time of taking out the mortgage loan.
  2. Simulates an interest rate hike scenario of no less than 300 basis points compared to the current rate at the time of the contract.

The duration of the prospectuses must be equal to the difference between the youngest financial entity and 85 years and not less than 15 years, and must include all the charges due to the lender at the time of the contract. If the financing is a fixed-rate contract, the prospectus may be unique.

Loan Insurance Policy

As is the case with a mortgage, the borrowed person must have the right to freely purchase the compulsory insurance policy on the property from a person other than the lender. In addition, the latter must send a report to the customer on an annual basis detailing the amounts that make up the financed capital and the capital to be returned at maturity.

If, at the time of the financing, the funded person is married, or cohabiting, and both spouses reside in the property in question, the contract must be signed by both, even if the property is owned by only one of them. This is because the age requirements must be owned by both.

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