The mortgage or home equity loan is a loan to finance all or part of the acquisition of a property , the construction operation, or work on such property.
For lack of sufficient banking, mortgage lending has really taken off at the xix th century during the promotional operations that fueled the housing bubble of the 1860s and the crash that followed .
The mortgage is framed by law. The framework of the contract and advertising practices in France appeared in 1978 (law of January 10, 1978). The right of mortgage to individuals comes from the directive 2014/17 / EU, of February 4, 2014, entry into French law since March 21, 2016.
All mortgages entered into prior to 1 st October 2016 are subject to the old law. Home loans awarded after that date of 1 st October 2016 are subject to the new rules.
New real estate loans are part of a specific legal process aimed at protecting consumer borrowers (Articles L. 313-1 et seq. Of the Consumer Code ). Renegotiations of previous credits are also part of this new framework; when these are granted by the original lender, they are not the subject of a new contract, but of an amendment .
Before March 21st, 2016
The Consumer Code stipulates the principles of distribution of real estate credit, in terms of consumer protection-borrowers by Articles L. 312-1 et seq (Book III, Title 1 st , Chapter II).
Comparisons between different real estate loans are possible through the use of a conventional indicator, the effective rate . Prior to 2016, the effective rate used for home loans to individuals was the TEG, or the aggregate effective rate . The determination of the TEG has produced a large amount of litigation between banks and borrowers. For example, the TEG is a proportional actuarial rate. The Court of Cassation has also recalled, in a judgment of 27 November 2013.
The Total Effective Rate (APR) is the total cost of a loan to the borrower expressed as an annual percentage of the loan amount. The TEG is calculated from the total cost of the loan: interest costs, insurance costs, brokerage fees, warranty costs. Enter in the TEG all fees that are obligatory to the granting of the credit. Loan insurance that would not be considered obligatory by the lender and declared as such in the offer would not be retained in the TEG. This is the indicator of the overall cost of a loan.
Home loans in foreign currencies are, in principle, subject to high duty of information as of 1 st October 2014.
Since March 21, 2016
On 4 February 2014, the European Parliament voted the directive governing the new legal framework for mortgage loans (the so-called “mortgage credit directive”, MCD, or initially CARRP for credit agreement relating to residential property “) .This Directive 2014/17 / EU on “consumer credit agreements relating to residential real estate” 1 is applicable throughout the European Union as from 21 March 2016.
In France, the directive is transposed by Order 2016-351 of 25 March 2016 2 , for the legislative part of the new framework.
The regulatory part derives from the Decree.
The mortgage credit to individuals is governed by the Consumer Code in Articles L. 313-1 and following, L. 314-1 et seq.
The monetary and financial code is also modified for intermediaries in banking and payment services (brokers and loan representatives).
The protection of the interests of borrowers, by the banking professionals themselves, appears as the priority of the new legal regime.
All professionals, distributors-lenders (agencies of credit institutions ) or intermediaries , are subject to the same obligations of professional competence at March 21, 2019, for the sellers of French banks) and supervision of the remuneration of the sellers of real estate loans.
The pre-contractual obligations are four in number:
- presentation (of the professional),
- information on credit, using the Sheet European Standardized Information , FISE ( 1 st January 2017 in France) 3 ,
- explanation, or warning, based on the creditworthiness of the borrower, as well as the valuation of the property,
- advice, if the professional opts for his delivery. 4
The “FISE” (European Standardized Information Sheet) card presents the essential information of the mortgage. It allows the future borrower to determine the adaptation of the credit envisaged, its needs and its objectives.
The Annual Rate Global Workforce , APR, now replaces the TEG as legal indicator of effective rate credit (the 1 st October 2016 for France).
The new provisions of the Consumer Code successively come into effect, the 1 st July 2016 5 , 6 , the 1 st October 2016 and the 1 st January 2017.
The regulation of credit consolidation is tightening 7 .
The iobsp , intermediaries mortgages 8 , enjoy free exercise device in the European Union 9 .
Types of goods concerned
The mortgage mostly concerns housing (home loan), used by the owner either for his primary or secondary residence, or for renting it to a third party. In the case of a rental investment, it is possible to deduct the borrowing interest [ archive ] of the property income [ archive ] .
It can also concern a property of report in its totality, or even of the real estate of company.
The REITs (real estate investment company) may also qualify.
In French law
Enter into the legal category of real estate credit agreements contracts intended to finance:
- residential, professional and residential buildings (acquisition, repair, improvement or maintenance of the building, purchase of shares or shares of companies, construction costs of a new building , for example),
- purchase of land for the construction of buildings,
- credit agreements secured by a mortgage, by another comparable security interest in immovable property (according to Article L. 313-1 of the Consumer Code , in its version of March 25, 2016).
Real estate loan transactions with professional borrowers or companies do not, in France, fall under the legal regime of mortgage loans.
A home loan most often has the following characteristics:
- established in the form of a loan of a specific amount (although there are also in particular cases forms for the opening of mortgage loans that can be used by drawings within a total ceiling).
- granted by a credit institution (a bank ) or a specialized financial institution.
- distributed (sold) either directly by a bank (a credit institution ) or by a credit broker (or Intermediary in banking and payment services ).
- established over a long period (several years or decades) except in the case of a bridge loan covering a waiting period between the purchase of a property and the resale of another property or another expected financial income).
- either at a fixed rate over the life of the mortgage (this is at least the most common case in France ), or at a revisable rate .
- linked to a personal contribution . However, financing of the entire acquisition (cost of acquisition of the property + notary fees + cost of the guarantee) is still possible.
- repayable in monthly installments.
- with a loan guarantee on the financed property.
- accompanied by disability death insurance on the borrower, application fees .
- limited to part of the value of the property; in general, a personal contribution of between 10% and 30% is required, in addition to the coverage of acquisition costs (cost of notarial deeds, taxation).
Types of home loan
From a technical point of view, there are several types of loans:
- Depreciable loan: repayable regularly by installments, often monthly.
- loan in fine : repayable at one time, at the end of the loan.
- Fixed rate loan: Debit rate known from the beginning of the contract and not varying.
- variable rate loan: the amount of interest can vary in real time depending on the direct evolution of a reference rate, plus a fixed margin of the lender.
- adjustable rate loan: the amount of interest may vary according to a financial index, such as the euribor , for example, at a pre-determined revision date.
- “Capped” rate loan: the evolution of the variable or revisable rate is limited to values known in advance, either for a fixed period or for the duration of the credit.
- progressive or declining loan: with maturities up or down.
- tiered loan: technique of calculating a single monthly payment of the same amount for two credits that overlap for a while.
- flexible loan.
Mortgage Brokerage Company
Several companies specialize in banking intermediation , including real estate brokerage . Access to this profession and its exercise requires the respect of specific conditions. 10
Since 1 st January 2013, they are subject to special regulations, extended their business practices 11 .
Intermediary brokers in banking and payment services (“IOBSP”) are subject to a credit counseling requirement 12 , which distinguishes them from other banking professionals.
The regulation of the banking intermediaries, brokers or agent , includes most of the countries of the European Union, in order to deploy a common policy of the internal market of the mortgage credit 13 .
In France, additional loans can be granted to the borrower. Their conditions of grant depend on the borrower’s profile, but often on characteristics related to the property.
These loans thus complete a prime mortgage; they are incorporated into the overall solvency study and the financing project:
- zero interest plus loan (PTZ +)
- employer loan (1% housing)
- subsidized loan
- housing savings loan
- Social Accession Loan (PAS)
- loan agreement (PC)
- social rental loan (PLS)
- intermediate rental loan (PLI)
- relay loan
- senior citizen loan
- young executive loan
- loan to future retirees
- real estate leasing
Notes and references
- ↑ http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014L0017&from=en [ archive ]
- ↑ https://www.legifrance.gouv.fr/affichTexte.do;jsessionid=BC3792A86BD83A71DA26810E9E456F20.tpdila15v_2?cidTexte=JORFTEXT000032294277&dateTexte=&oldAction=rechJO&categorieLien=id&idJO=JORFCONT000032294004 [ archive ]
- ↑ Model and comment sheet FISE in real estate credit | http://endroit-avocat.fr/wp-content/uploads/2014/11/MOD%C3%A8le-de-FISE-Directive-MCD-Code-de-la-consommation-1er-October-2016.pdf [ archive ]
- ↑ https://www.francebleu.fr/emissions/les-experts/107-1/le-credit-avec-laurent-denis [ archive ]
- ↑ Real estate loans as of July 1 , 2016 | http://www.economiematin.fr/news-credit-immobilier-changement-regles-juillet-2016droits-consommation-denis [ archive ]
- ↑ New rules of mortgage credit | http://news.radins.com/news/credit-immobilier-changes-1-July-2016-more-security,25104.html [ archive ]
- ↑ http://www.cbanque.com/actu/56676/rachat-de-credits-les-specialistes-tait-la-sonnette-ararm-on-the-directive-pret-immobilier [ archive ]
- ↑ “home loans to private individuals and professionals ” [ archive ] , on credit-alsace.com
- ↑ http://www.cbanque.com/actu/56779/credit-immobilier-plus-de-compurrence-with-a-market-europeen-of-courtage [ archive ]
- ↑ http://proper-avocat.fr/credit-real-estate-to-particuliers-access-and-exercise-the-profession-of-distributor/ [ archive ]
- ↑ Hervé CAUSSE , ” Law of bank distribution, by Laurent DENIS ” [ archive ] , on hervecausse (accessed March 25, 2016 )
- ↑ http://www.lesechosdelafranchise.com/en/franchises-financial-services/the-soft-at-out-of-franchises-from-the-council-in-credits-l-denis-39250.php [ archive ]
- ↑ ( de ) ” Immobilienkredit ” [ archive ] , on immokredit24.info (accessedMarch 25, 2016 )