Home Loan regulations – The Malta Independent

Taking out a home loan is a major financial commitment especially for young couples buying their first home. Renovating and improving your residence also incurs a hefty amount of money which cannot be easily affordable in the current economic situation. It is not an easy task to repay a loan and if not being careful one can easily find himself in financial problems. Therefore, this activity requires good planning and the need to shop around prior to committing oneself in a home loan agreement.

In order to make an informed choice, the Home Loan Regulations which came in force in January this year, make provisions that the lender should provide the necessary information to consumer prior to signing the home loan agreement. The creditor should furnish consumers at all times with the information in a durable medium or in electronic form, in plain and intelligible language that can be easily understood by the consumer.

These regulations apply when consumer acquires his own residence or that of his dependants or when alteration or improvements need to be carried out on the residence. However, these regulations exclude home loans which will be repaid from the sale proceeds of immovable property, where the credit is granted by an employer to his employees free of interest or at an annual percentage rate of charge lower than that prevailing on the market and not offered to the public in general, and where credit is granted without payment of interest or any other charge.

Obligations of the Consumer

The consumers shall provide their creditor with complete and correct information on their financial situation when applying for a home loan in order to carry a necessary assessment of consumers’ credit worthiness. This information should be supported by documentary evidence from independently verifiable sources and should be requested by the creditor prior the contractual phase. If such information is not provided by the consumer, the creditor shall warn the consumer that the home loan may not be granted.

What other obligations does the creditor have towards the consumers?

When tendering advice to consumer about a home loan and other services related to the loan, the creditor should act honestly, fairly and professionally in accordance with the best interests of the consumer. In addition the management of the credit company should ensure that the staff has the appropriate level of knowledge and competence in relation to the loan being offered and posses recognised qualifications and professional experience. Management and staff should also possess the necessary knowledge and competence with regard to the insurance or other services related to the home loan.

What type of information should be given to consumer by the creditor?

Amongst others the general information should include the following:

• identity and the geographical address of the creditor;

• purpose for which the home loan may be used;

• forms of surety;

• a list of administrative cost, insurance costs, legal costs;

• an indication of the cost of a typical home loan for the consumer;

• the different options available for reimbursing the credit to the creditor;

• a description of the conditions attached to early repayment;

• the duration of the home loan agreement;

• an indicative example of the total cost of credit for the consumer and annual percentage rate of charge;

• details on how to obtain information on tax relief on the home loan agreement interest or other public subsidies.

Furthermore, after the consumer has given the necessary information on his financial situation and preferences, the creditor should provide him with the personalised information needed. This information should be provided on the European Standardised Information sheet (ESIS) and should be drawn up on paper or on another durable medium. This will enable consumer to compare offers available on the market and asses their implications, thus making an informed decision on whether to conclude the home loan agreement.

What are the consumer’s rights after conclusion of the contract?

On conclusion of the home loan agreement, the consumer is entitled to a copy of the final agreement which has been duly registered by the notary within fifteen days from the signing of the agreement.

Besides the information mentioned above, the final agreement should also include the annual percentage rate of charge and the total amount payable by the consumer calculated at the time the home loan is concluded. Furthermore, it should provide the right of the consumer to receive, on request and free of charge, at any time throughout the duration of the home loan, a statement of account in the form of an amortisation table.

What happens when consumer repays loan earlier than stipulated in the agreement?

In such circumstances consumer has the right for a reduction of the remaining total costs of the credit. On the other hand the creditor is entitled to a fair and objectively justified compensation for possible costs directly linked to early repayment of credit.

Joyce Borg is Information, Education & Research Directorate

Office for Consumer Affairs

MCCAA