Banks charge these fees in three ways. The first and most widely used is to increase the loan interest rate by 0.5-2 points. percent.
This results in an increase in the monthly loan installment and does not constitute a separate payment, which if a valid entry is obtained earlier, will be refunded to customers in the portion related to the unused insurance period.
The higher interest rate or premium
This means that for an average loan of 250,000. USD, granted for a period of 30 years with an interest rate of 6 percent (according to Good Finance data, these are average values that characterize currently granted loans), the monthly cost of bridging insurance may range from about USD 80 to over USD 330 (depending on the bank).
The total cost of transitional security also depends on the pace of work of the district courts, which are responsible for making entries in the land and mortgage register.
Entry in the land and mortgage register in an average of 27 days
According to the research of the statistics department of the Ministry of Justice, in the first half of 2011, more than 1.64 million cases related to land and mortgage registers were considered in district courts. According to the authors of the study, this area of litigation was among the most efficiently managed.
The proof is the surplus of pending cases (over 1.64 million) over the number of submitted applications (1.58 million), and thus a decrease in the number of cases left for consideration in the second half of the year (228 thousand in 2011 compared to 256 thousand in H1 2010).
This is good news for borrowers. Data for the first half of 2011 indicate that the courts are now working more than twice as fast as three years ago. The statistical case in the land and mortgage register court in 2008 was settled in about 55 days and from that moment the examination time gradually decreased, in 2009 to about 48 days, 2010 up to 35 days, to reach a record 27 days in the first half of 2011. However, it should be remembered that these are only average measures.
In different regions of the country, waiting for changes in the land and mortgage register may take much longer, but shorter waiting periods are not isolated. Undoubtedly, however, shortening the processing time for applications is good news for borrowers, because it means savings for them. Fees only until the entry becomes final.
The speed of making an entry in the land and mortgage register is key to determining the actual costs of bridging insurance for customers.
The judgment of the Court of Competition and Consumer Protection of 9 August 2009 prohibits the collection of any additional fees from customers after all collateral required by the loan agreement has been established. This means that the bank has the right to charge additional fees only until the entry becomes valid and not until the customer brings to the bank a copy of the land and mortgage register, in which the mortgage of the bank will be in the first place. All fees collected after this time must be refunded to the customer.
In practice, the cost of bridging insurance incurred by the client in the first half of 2011 was on average around USD 180 (an example loan of USD 250,000 for 30 years, with an interest rate of 6 percent, a margin increase of 1.2 percent). Three years ago, more than twice the waiting time for consideration of a case in the land and mortgage department of the district court meant that these costs were around USD 370.
What does the mortgage establishment process look like?
The collateral for each mortgage is the entry of a mortgage in the land and mortgage register. Banks usually also require that their mortgage is in the first place, before any other entries. How to efficiently carry out such a process? In a situation when we buy an apartment on the secondary market, previously charged with credit, at the stage of completing the credit documentation, information on the amount necessary to pay the previous liability should be provided to the bank granting the loan for the purchase.
An additional condition for disbursement of the loan will also be the submission of an application for entry into the land and mortgage register of the buyer’s bank.
If the entry were made immediately, it would be in second place on the list of mortgages, which could not constitute full collateral for the loan. It is worth remembering that the application for entering a mortgage is submitted to the district court appropriate for the location of the property, which can also be done by a notary public.
When the bank receives confirmation of submitting the application for registration of the mortgage, it first pays funds to the repayment account of the previous mortgage. Only after the full repayment of the “old” loan will the seller be able to obtain the documentation necessary for the buyer to remove the mortgage entry for the previous loan.
It is worth remembering that the buyer, not the seller, will have to go to court to file an application to delete the previous mortgage from the land and mortgage register. Deleting this entry will cause the buyer’s bank to move to first place on the mortgage list.