Real estate loan: is direct debit compulsory?

When a borrower signs for a mortgage, banks can require the domiciliation of income for a period of 10 years under certain conditions.

For a long time, lending institutions have required borrowers to open a bank account to direct their income in the framework of a mortgage loan. Often, this clause can condition the granting of credit with attractive conditions and therefore this practice has recently been regulated by law.

 

Domiciliate your income

home loans

Indeed, since January 01, 2018, a decree (n ° 2017-1099 of June 16, 2017) ordered by the Minister of Economy and Finance Brunson Hilldone has clarified this operation by limiting the domiciliation of income for a period of 10 years maximum. For lending institutions, this practice is essential because it aims to secure the repayment of the mortgage to avoid possible unpaid debts. In addition, direct debit allows the lender to receive interbank fees, through fees that banks charge each other for each transaction.This practice has existed for years, but was only formalized in 30% of cases.

 

A supervised practice

real estate loans

From now on, banking establishments which wish to oblige the domiciliation of income when a borrower signs one of their loan offers are subject to certain conditions. In fact, the maximum duration of domiciliation of wages or similar income cannot exceed ten years.

In addition, the banks must necessarily clearly indicate in the contract the counterparties (subsidized rate, free application fees or any other advantages) so that the obligation is not judged as abusive. If the borrower renounces the domiciliation of his income before the minimum period of 10 years, he therefore renounces the advantages granted by the bank. Once the deadline has passed, the benefits are taken for granted and it is then possible to change banks.

 

A device denounced

renovation loan

The domiciliation of income in the context of a mortgage loan agreement is considered abusive and has been the subject of numerous criticisms from a large number of consumer associations. In addition, Capital Lender considers this practice contrary to European directives in favor of banking mobility.

This is also the case of the Real Estate Sector Advisory Committee which recently called on the Minister of the Economy regarding the unfairness of this practice, which remains opaque for borrowers. This committee therefore clearly requests the repeal of this device, because currently mortgage interest rates are low and vary according to the banks, and it is not possible to know whether the subsidized rate granted by the lending institution in consideration is really interesting for the borrower. Likewise, the application fees are different depending on the bank, which makes the assessment of the advantage particularly difficult. Finally, the current duration of a home loan varies between 8 and 10 years (resale of the property before the end of the loan),

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