The news has been skillfully revealed and disseminated for a few weeks. According to some experts, almost half of the mortgage loan contracts in France do not respect the rules. Missing mentions, wrong calculation of TEG, these omissions can cost a bank dearly and make you big. Indeed, a simple error of 0.01% on the TEG obliges the lender to apply the legal rate of the Cream Bank to you.
Mistakes in home loan contracts
Incorrect calculation of the overall effective rate (TEG)
The TEG, also called APR (Annual Effective Total Rate) represents the effective cost of a mortgage. It takes into account not only the nominal rate, but also the borrower insurance premium, application fees, brokerage fees as well as the deposit or mortgage. In fact, all the costs relating to the real estate transaction added to the debt must be taken into account in the calculation of the TEG.
This calculation is relatively simple to perform, especially since the bankers have software. And yet mistakes are common, to the extent that some find it in 50% of loan contracts.
Note: if your personal contribution is used to pay the notary fees, these will not be included in the calculation of the TEG. It is also necessary that the loan contract specifies that the notary fees were paid by your contribution.
Absence of the period rate and its duration
The period rate of a home loan contract is little known to the general public. This is a percentage allowing in particular to maintain the balance between paid-up capital and interest paid. It is used in particular when payments are made at an irregular frequency.
Forgetting to mention the rate and the length of the period is equivalent to a disputed offer. Following the absence of the mention of the period on a loan contract, a borrower is seen receiving $ 35,000 from its lender.
No mention of certain obligations
When a home loan is granted by a mutual bank, the borrower is required to buy shares in this mutual. This obligation must imperatively appear in the credit agreement. Recent studies have shown that many borrowers who have borrowed from a mutual bank do not have this kind of clause.
Calculation error yet simple
This common mistake on a loan contract mainly affects the elderly. Indeed a borrower insurance could cover them only until a certain age, the last years of the credit will not be included in the guarantee death disability.
Sometimes the employee responsible for calculating the TEG forgets that the borrower insurance will end before the end of the mortgage. In his defense, it is true that this situation is not common, this error could still have serious financial consequences for his employer.
Take advantage of flaws in the form of a home loan contract
What the law says
The law specifies that in the event of a defect in the form of a mortgage contract, the legal interest rate that automatically applies for the entire duration of the contract. As soon as the court found the formal defect, the amount of interest that the borrower should have paid at the legal rate is calculated. The lender reimburses the overpayment, and will now collect said interest at the legal rate.
What is the legal interest rate?
The legal interest rate of the Cream Bank is the reference used when an administration or an individual has to pay interest on arrears. Some cases are concerned only, but what is interesting is that its level is extremely low. In 2013, the legal interest rate was 0.04%.
Note: it is calculated by averaging the actuarial rates of return on treasury bills for the last 12 months.
Example of interest repayment
To illustrate what a borrower could gain if there were flaws in their loan agreement, let’s take this dummy example.
In 2010, a couple signed a home loan contract for $ 200,000 over 20 years, with a TEG of 3.2%. They should therefore pay in all and for all $ 71,000 in interest. Then they realize that their contract contains defects. Justice gives them reason, and obliges the lender to apply the legal interest rate in force in 2010, ie 0.65%. The couple will therefore have to pay $ 13,300 in interest over the entire duration of the repayments, a savings of $ 57,700.
Recovering interests in practice
The date of signature of the loan contract
The legal interest rate in effect on the date of the signing of the loan contract must be really low, for the operation to be interesting. For example, in 2009 it was 3.79%, and 3.99% in 2008. It was not until 2010 that it started to become really interesting.
Banks don’t let it go
Banks and credit companies have a competent legal department. Only truly lapsed loan contracts will give rise to a review of interest, as well as a reimbursement. Applicants must approach a specialized lawyer and bear their fees.
The reaction of the banks
Given the extent of this information via the Internet, it is a safe bet that financial institutions will defend themselves. They will in particular try to soften the sanctions, however if there is relaxation, this will only concern the loan contracts signed after said relaxation. In fact, retroactivity is not permitted by the constitution.
Are you concerned?
Consult your loan agreement
There is only one way to find out if you are affected by form defects in home loan contracts. Take your contract, and try to determine if the TEG has been correctly calculated, and if no compulsory mention has been omitted.
If your loan contract does not contain any defect
Rumor has it that 50% of home loan contracts are affected. If you are one of those people who never win the lottery, your contract may not be flawed. Rest assured, it is always possible to renegotiate a rate if certain conditions are met.
Contact the brokers of Good Finance, they will study the arguments that may work in your favor. Your banking seniority, your professional stability, the remaining repayment period as well as the value of your property are all leverage that an experienced broker will be able to operate.