When making an appointment with a mortgage broker or banks, it is possible that we talk to you about bank domiciliation. If you do not know this term, we explain its interest.
Is bank domiciliation mandatory for borrowers? This question is to be taken into account during a mortgage loan, we will see what the jurisdiction says and the position of your bank on this subject.
What does the law say about bank domiciliation?
The law around bank domiciliation better frames this topic since January 2018, the state gives more leeway to borrowers. Prior to this date, the lending institution could compel the domiciliation of income in exchange for a mortgage .
Today, banks have no right to require you to pay your business income, except in case of exchange of a preferential condition.
In exchange for a bank domiciliation, the lending organization can potentially give you several advantages:
- Interesting interest rate
- Cancellation of administrative fees and other bank charges
- A penalty cancellation in case of early repayment
Since January 2018, the lending institutions have been obliged to inform the client of his status as a domiciliation of income or professional wages.
The duration of the bank domiciliation is for a maximum duration of 10 years. After this period, the benefits obtained in exchange for the bank domiciliation will be kept. Before this 10-year period, your individualized benefit may be lost for the next installments.
What does the law say regarding the domiciliation of income?
Bank domiciliation is required by banks
Banks require that the domiciliation of the professional wages of their customers be made to grant a mortgage. Most often, this is not indicated in the loan offer made by the lending institution.
The borrower can change banks after subscribing to the mortgage. However, he will be required to domicile his income in the same financial institution, if this is stipulated in the contract in exchange for consideration.
Supervision of the domiciliation of wages
Banking organizations still force their customers to open bank accounts today, this facilitates the domiciliation of their income, this practice is framed by a prescription. However, this order may soon be legal.
The lending institution is obliged to inform the borrower as soon as the loan is acquired. The law of January 2018 states:
- The duration of the domiciliation of wages
- Account costs (opening and management)
- The advantage offered to the client
As said before, the domiciliation is limited to 10 years maximum, once this period exceeded, the counterpart made by the bank will be in the possession of the customer definitively, but will be removed if the borrower does not respect his commitment. This measure must be included in the contract and must be stipulated by the banker beforehand.
Bank domiciliation changes according to the real estate project
Each real estate project has its particularity, and this influences the counterparties that a lending organization can ask you. An investor or a first-time buyer does not have the same financing conditions. If you are an expatriate, making a domiciliation of your professional income will be more complex, it may be that the bank created special restrictions.
Banks can not ask a non-resident to domiciliate his income on the national territory, so they rarely grant a real estate credit to this type of profile. The project is however not impossible, for a non-resident real estate loan do not hesitate to contact us at 01 85 56 22 34 for by email.
Other counterparties are requested by the banks
Beyond the private banks, on the French territory, exist mutualized banks. Depending on the bank that the borrower chooses, the counterparties are different. It is therefore necessary to differentiate the different banks:
- Commercial banks: they have traditional financial operations: deposits, credits or investments
- Mutual banks: the client is also a shareholder
- Specialist banks: their main activity is the loan
Contribute to the shares of a mutual bank
All mutual banks do not ask for the same counterparties. Some ask their client or those who took a mortgage to take shares of about 50 euros per borrower. In any case, all the mutual banks will ask to take shares.
Subscribe to insurance
The mortgage is the flagship product of banking institutions. Attractive real estate rates are offered to attract as many borrowers as possible. But lenders do not just offer you to subscribe to a mortgage.
These different insurances will protect you from claims or risk of damage to a third party. Some banks go as far as conditioning the obtaining of a mortgage if one of these insurances comes to be subscribed.