Anyone looking to buy a house is now better protected thanks to new mortgage rules (set out in the Code of Conduct for Mortgage Lending). With more information, consumers will be better able to compare mortgages; conditional offers will be phased out; and fees for early repayment of mortgages will be restricted.
From now on, lenders, such as banks, must provide people seeking a mortgage with a European information sheet containing all the relevant details. This will make it easier for people to compare different mortgages, including those from abroad. Lenders must also now state the annual percentage rate of charge for the mortgage.
End of conditional quotation
The offer made by a lender after providing the information sheet is final and binding. This means that the conditional offer is no longer valid. Any subsequent changes can only be to the consumer’s advantage. The consumer has a fourteen-day cooling-off period following the offer.
Early repayment fee
The lender may still charge a fee in the event of early repayment of the mortgage, but strict conditions apply. The fee must not exceed the financial loss incurred by the lender as a result of the early repayment. This usually relates to lost interest payments. In any event, loss of profit must not be taken into account.
Model-based valuation
To ensure that homebuyers incur lower valuation costs, model-based valuations will become more common. This means that, when taking out a mortgage, the value of the property will be based on the WOZ value or another reliable model-based valuation. However, this is subject to the condition that the mortgage amount does not exceed 90% of the property’s value as determined by the model-based valuation.
High gift tax allowance
With effect from 1 January 2017, the limit on the amount that can be gifted free of gift tax for the purpose of financing a home will be increased again to €100,000. Particularly if an increased exemption has been used in the past when making gifts to children, it is advisable to have an assessment carried out before the end of 2016 to determine whether further gifts may be made under the new exemption in 2017 and/or 2018. See our article Gift exemption requires anticipation.