With the first home loan, it is possible to obtain liquidity for the purchase of the first home. This is an alternative to the payable mortgage when the amount requested is low.
THE FIRST HOUSE LOAN
When the amount necessary to purchase a property is low – usually less than about 50,000 euros – the first home loan turns out to be a valid alternative to the mortgage loan which, for these amounts, is not paid by the banks (like the expenses investigation procedure would be too burdensome for the buyer with respect to the amount granted).
This type of loan is indicated for those looking for a property that is not of value or low cost, or for those who already have the majority of the amount necessary to purchase the property.
The preliminary investigation of a loan practice is definitely slim and fast, so this type of loan is particularly suitable for those who have a certain urgency to receive the money.
No mortgage on the building is required as a guarantee. If on the one hand, this aspect makes it possible to streamline the preliminary investigation process, on the other the absence of the guarantee leads the lending financial institution to request a higher APR than the mortgage.
THE ELEMENTS OF THE CONTRACT
The law states that a first home loan contract must contain the following elements:
- the interest rate charged;
- any other price and condition applied, including the higher charges in the event of default;
- the amount and methods of financing;
- the number, amounts and expiry of the individual installments;
- the annual percentage rate of charge (APR);
- the detail of the analytical conditions according to which the APR can possibly be modified;
- the amount and purpose of the charges that are excluded from the APR calculation;
- any guarantees required;
- any insurance coverage required and not included in the APR calculation.
The law guarantees the consumer the possibility of early repayment of the loan. If the consumer decides to choose this option, in addition to the repayment of the residual capital, he could pay a penalty that must not exceed, by law, 1% of the financed capital; the exact terms of the penalty are reported in the signed contractual conditions.
Below we illustrate in a schematic way some specific evaluation criteria of the first home loan.
- Risk policies: each Institute applies its own risk policy in the assessment of requests, based on the statistical data it has (credit scoring). This data is the tool that allows the Institute to keep insolvencies below a certain level.
- Income level: the acceptance of the requests is normally also subordinated to the evaluation of the income level of the applicant and to the relationship between the latter and the possible repayment installment.
- Creditworthiness: the creditworthiness of the applicant is of great importance. It is important to emphasize that this evaluation has no “moral” meaning. The Institutes are limited to estimating the level of risk connected to each request, also on the basis of the indications transmitted by the Central Risks. If the credit history of the applicant has some “flaws” (delays in repayments of previous loans, unpaid debts, etc.) the probability of the request being accepted is obviously lower. In some of these cases a valid alternative is constituted by the Assignment of the fifth: this solution, offering the appropriate guarantees to the financing Institute, allows the adoption of more flexible evaluation criteria.
Home loans can be requested for both the main residence (first home) and the second home, and also for the purchase of a box. They are provided by financial institutions and banks. They do not require specific requirements, except for a certain income and a credit position of the applicant for the loan which confirms adequate financial reliability of the same.