New rules in real estate financing
New rules for real estate financing were introduced this March. It is the EU residential property guidelines. The result is often that approved loan applications are withdrawn and the potential borrower is no longer considered creditworthy. As a result, the rules for granting loans have become stricter. It is questionable how young families in particular can still get a loan application approved.
Change in the rules for the granting of real estate loans
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To date, banks have not only used the amount of applicants’ income to approve a loan application. The value of the property was also viewed as security and was included in the calculation. The second point, however, changes with the requirements of the EU residential property directives. The value of the property is now irrelevant for the rating of the creditworthiness. Banks now only rank borrowers based on income and existing assets.
Aim of the new guidelines
The main aim of the new directive is to protect private individuals from over-indebtedness. However, quite a few credit institutions raise the alarm. The reason for this is falling numbers in lending. The Astro Finance- und best bank alone had 9% fewer loan commitments in the first half of the year than in the previous year. According to the credit institutions, the new regulation means that certain customers will no longer be approved for loans. Elderly people are particularly affected, who want to convert or modernize their homes to suit their age.
The reason is that the income is insufficient to repay the loan with the remaining life expectancy. Previously, banks could still grant a loan. Despite the insufficient repayment of the loan, the banks were able to offset the difference by the value of the property.
Young families suffer from the scheme
The EU residential property directive does not only affect older people. Young people, especially families, are also affected by the change. Despite regular income and a not insignificant amount resulting from the difference in income and expenditure, loan applications are now rejected. According to the new calculation, despite the possibility of repaying a loan, they are not creditworthy. It was not just the banks that raised this issue. Politicians are now also dealing with the regulation of lending. However, the Cream bank has not yet seen a slump in the residential loan segment.
Improve chances of getting a loan
Despite the new real estate loan scheme, middle-income families still have the chance to get a loan application:
- For example, it can be checked whether funds such as loans can be used by Capital Lender.
The repayment modalities can also be chosen in the longer term.
- Residential Riester or building society contracts are also helpful. These are particularly useful when it comes to lowering interest rates.
- Parents can also help increase the chance of a positive loan application. For example, a gift increases borrowers’ capital. Parents can also sign the purchase contract and thus transfer part of the land charge to their own home.
In any case, consumers have only one thing with a rejected loan: perseverance and patience when looking for the right credit institution.