How to read the FINE of a housing loan?
However, after finding the house of your dreams, it is tempting to accept the first proposal of financing that appears to you, ensuring that you have the best conditions will save you thousands of euros during the long years you will have this charge. The bank proposal will come in the so-called FINE. Find out how to review this document.
Discharging a mortgage lending process is essential for all parties involved. Whether it’s the bank, the consumer or the seller, it’s only natural that everyone wants to close the deal as fast as possible.
However, accepting a proposal that does not have the most appealing conditions can bring high costs to the consumer. First compare the conditions of various financial institutions to ensure you save the most on this decision that will impact your finances for a long time.
What is a FINE?
FINE (European Standardized Information Sheet) consists of a document that is compulsorily delivered by the bank to the customer requesting a mortgage loan, containing all the conditions of the financing proposal.
Since the beginning of 2018 this document has been governed by European standards, which means that, despite some differences in content that can be reported from bank to bank, the structure of the document follows the same rules throughout the Union European Union.
It should be noted that FINE is, basically and above all, an information document that the client should read with all due attention, since it is in this that all the conditions will be present (at the level of spread, APR, monthly payment, etc.) that the bank offers the customer.
Consequently, it is only through this document that you will be able to analyze and compare proposals from various banks.
At what point in the mortgage lending process does the customer receive FINE?
Suppose you already know which house you want to buy, lacking only the financing. Here it compares the conditions of the banks in Portugal and advances with an application for mortgage credit. In what part of the process is FINE supposed to have access?
The answer lies in two distinct moments:
- First, after performing the housing credit simulation based on the information you provided to the bank;
- Secondly, after the request for funding is approved. In this second phase, the client must sign the FINE that the bank has provided him, thus confirming that he agrees with all the conditions.
What are the constituent parts of a FINE and how do you understand each one?
A FINE consists essentially of two parts (sometimes referred to as “Part A” and “Part B”) and 10 distinct sections which are normally described in the order given below.
# 1 – Identification of financial institution
First of all, the first element of FINE concerns the name, contact and address of the bank. In this section the credit intermediaries involved in the process shall also be identified (if any).
# 2 – Key Features of the Loan
This part refers to the amount and term of the loan that the consumer requested from the bank, as well as the type of credit, the interest rate ( fixed, variable or mixed) and the indication of the MTIC (Total Amount Attributed to the Consumer) and the latter refers to the total cost of credit to the consumer.
Deepen: MTIC: Why is this acronym so important?
Likewise, this section should include the guarantees required by the bank (usually referring to a mortgage on the acquired property and / or to the requirement of guarantors), as well as the presumed value of the property.
Read also: How to protect home loan guarantors?
# 3 – Interest rates and other costs
This part includes the indication of the APR applied to the loan, as well as the TAN and the commissions payable to the bank (property valuation commission, process opening, formalization, solicitation, among others that may exist).
Normally this section also includes the insurance required by the financial institution (life insurance and multi-risk insurance).
# 4 – Information on monthly installments
You can read below the monthly installments of the loan, the periodicity (which is normally monthly) and the indicative amount of the loan.
# 5 – Additional Obligations
This section of FINE indicates which obligations the consumer has to meet in order to qualify for the loan conditions being offered by the bank.
Basically, in other words, it is a description of the banking products that the customer needs to hire in order to have a bonus on the spread (a procedure that banks call “optional associated sales”), which are usually:
- Opening of the account to the order and domiciliation of the salary;
- Life insurance ;
- Multi-risk housing insurance ;
- Credit card.
The conditions required to lower the spread of housing credit differ according to the banking entity. Of course, if during the term of the contract the customer gives up some product, the bank reserves the right to change the spread, failing to apply the bonus that it had granted.
Be sure to also read: 6 Strategies for negotiating the spread with the bank
# 6 – Early Redemption
If given the opportunity to make a repayment, either partial or total, the loan amount is in this part of FINE that is this statement, and the time limit that the consumer must meet to start this procedure.
# 7 – Flexible Features
In a FINE that has this section must include the possibility of the client being able to transfer the housing credit to another bank upon prior notice.
# 8 – Consequences of non-compliance
This area of FINE describes the consequences for the consumer of the non-payment of the monthly installments, namely the default interest rate to be applied.
# 9 – Optional Associated Sales
Here we indicate which APR was actually applied to the loan by contracting other bank financial products and services.
# 10 – Refund table
This section contains the financial plan for the loan, allowing the client to have a more precise idea of how much to repay, in each installment, the amortization of capital, interest, taxes, life insurance and multi-risk. It is also indicated which capital is outstanding and what is the total to be paid.
You can also consult in this area of FINE what would be the financial plan of the loan with an increase in the TAN to the highest value of the index of the last 20 years and without the financial effect of the associated sales.
This last part serves, in essence, for the client to be aware of the indicative value of his monthly installments and what would be the increase of the monthly fee due to an increase in the interest rate (which can happen on loans contracted with variable rate).
There is other information, other than those described, that may be included in FINE and that are specific to each bank. However, the structure of the document does not differ substantially, which makes it easier for the consumer to compare different proposals.