Rules for renegotiating housing loans are already in effect. What you need to know – Credit

 Rules for renegotiating housing loans are already in effect.  What you need to know - Credit

within the framework of the government-approved mechanism to mitigate the effects of interest rate hikes and, by extension, Euribor rates. There are tight deadlines for banks and customers to move to this solution when household effort levels reach certain levels. A guide not to get lost.

Which contracts can be renegotiated?
The diploma stipulates that contracts for own and permanent accommodation can be renegotiated, with a variable Euribor rate and up to 300,000 euros of the outstanding capital. In other words, loans with a fixed interest rate, loans for a second residence and even loans taken out for consumption are excluded. According to the State Secretary of Finance, this threshold includes “almost all” home loan contracts. The figures put forward by João Nuno Mendes on the day the government approved the decree point to 100 billion euros in home loans, two million debtors and 1.4 million contracts.
Who can renegotiate your contract? The government defines three criteria to anticipate difficulties in mortgage loan payments and which can dictate the renegotiation process. The first is always that the effort percentage, i.e. the weight that mortgage and consumer credit repayments have on net disposable income, reaches 36%. The second is when the effort rate, as a result of this year’s Euribor increase, has increased by 5 percentage points. Finally, a renegotiation will always take place when the effort percentage exceeds 50% (regardless of the year-on-year variation or compared to the start of the contract).
How is net income calculated?According to the diploma now published, it is the amount received by the holder (or holders) of the credit, excluding taxes and social security contributions according to the last income statement submitted to the tax authorities, divided by 12 months. For dependent employees, the amount of average monthly income received in the last three months is taken into account, according to the information provided by clients. For green coupons, or with seasonal income, the monthly income is calculated according to the data provided by customers.

Who opens the renegotiation? It is up to the banks to assess their portfolios within 45 days of the entry into force of the diploma and to identify the customers affected by this measure. But families can also do this if they run into payment problems. Supervision will be in the hands of Banco de Portugal.

How up to date are the banks?The credential stipulates that banks check for evidence of a significant effort rate increase or verification of a significant effort rate (50%) at least 60 days prior to the next rate reset. Banks can ask customers for additional information, such as a statement and proof of income, and have 10 days to do so.

What solutions does renegotiation allow? Negotiations can result in an extension of the credit term, credit consolidation, switching to another bank or a reduction in interest rates for a period. In each of these hypotheses, however, there is a condition that must always be maintained: “No interest rate hike can happen,” stressed Secretary of State João Nuno Mendes. “Do not deviate from the rate that is set,” he added afterwards. This is because “in a situation where there could be difficulties, the tendency would be to increase the index and the spread,” admitted the Treasury Secretary. “The goal is that this is not the negotiated solution,” he said. Is it possible to go back to the previous deadline? One of the options offered in the diploma is that within a five-year period after the renegotiation — and if their effort rates fall — families can return to the originally negotiated credit term. Does the renegotiation have costs? According to the government, the renegotiation is “free of charge for the customer”. With regard to the payment of the stamp tax (IS), the executive initially did not clarify, but the PS presented a proposal to amend the state budget for 2023, which was approved, exempting the payment of the IB. And write off? Do I pay a fine? Families that proceed to early repayment of home loans will not pay the 0.5% penalty on that advance until the end of 2023 and from the entry into force of the diploma. How long are these rules valid? The diploma foresees that the new renegotiation rules will be in force until the end of 2023.Are customers marked by default?Yup. There will be a signal at the renegotiation credit center.

What sanctions for banks?
If banks do not comply with the rules of the diploma, they risk fines provided for in the General Regulations for Credit Institutions and Financial Enterprises, which can amount to 1.5 million euros.