1. Which mortgage loan maturity is right for me?

Most mortgage loans are created on the basis of a 20 years repayment plan, but they can vary from 10 to 25 years. When you consider the maturity you want, decide how much you can comfortably pay each month. The shorter the maturity you choose, the higher your overall monthly payment will be, but the more you’ll save in interest charges over the life of the loan.

2. What is the interest rate of the loan?

Interest is essentially the price you pay the lending institution for the use of their money. Of course, the lower the interest rate the lower your monthly- and overall payments. Be careful in understanding the difference between nominal and effective interest rate. The nominal rate as frequently communicated in TV’s spots does not include other credit cost (commissions, fees, insurance premiums, etc.), whereas the effective interest rate takes those additional credit costs into account.

3. How much is the customer participation in the investment (down payment)?

Customer participation is minimum 20 % of the sale price of real estate. The down payment amount is usually generated from family savings. It is necessary to know that the new house will require also other expense such as furniture expenses. In order to afford also these expenses, one can liquidate the minimum down payment amount required and to use part of the savings for buying furniture or liquidating other expenses. If the customer participation is lower the monthly instalment will be higher.

4. What is the mortgage loan amount?

The mortgage loan amount is the amount of money you are borrowing. When buying a home, this amount is usually the price of the home plus any fees and costs minus your down payment. The lower the dawn payment amount is the higher the mortgage loan amount required. If you are refinancing, the amount of your refinance loan should be the payoff of your current mortgage plus any fees.

5. What is a credit register inquiry?

When you apply for a mortgage loan the bank credit officer should obtain a release from each applicant, co-borrower and surety in order to obtain a copy of his/her credit report from the Credit Registry. The Credit Registry is an electronic database on borrowers/sureties from the Albanian banking and financial system. The borrower’s/sureties report generated by the Registry contains information on the loan amount, repayments, amount on arrears, collateral, credit lines when the borrower is a related person and loan status history over the last two years. You should be very careful in the repayment process to be as regular as possible in order to have a good credit history. Customers with bad credit history may find difficulties if they want to be refinanced.

6. Do the monthly mortgage payments include property and life insurance?

The monthly principal and interest payment does not include the amount you need to pay every year for life and property insurances. Most of mortgage loan contracts contain a requirement that the borrower pays both insurances.

7. What are the closing costs of the loan and to whom are they paid?

Closing costs may be difficult to spot because often they are paid at the disbursement date from the loan that you are getting and not out of your pocket—but you are still paying them! Some of the closing costs are disbursement commission, property and life insurance, etc. Make sure you understand what each cost item is and to whom the money is being paid.

8. Does the loan contract contain a prepayment penalty?

A prepayment penalty is a fee you will be charged if you pay off your loan early.  Actual prepayment penalties applied by the banks based on Bank of Albania regulation are 2% of the prepaid loan amount in case the period between the prepayment and the loan maturity is more than 1 year and 1% of the prepaid loan amount in case the period between the prepayment and the loan maturity is less than 1 year.

9. Do I need to understand all the clauses in the signed documents?

You should carefully read and understand the loan agreement, the mortgage contract, and the insurance policies in order to understand your rights and liabilities at the same time. You may find difficulties in understanding the loan terms and conditions, so do not hesitate in asking the credit officer.

Be careful to ensure that everything you have discussed and accepted during the loan origination process is materialized in the legal documents. What matters in the end to solve future problems is only that.

10. Can I transfer the mortgage loan outstanding to another bank?

You have the possibility to transfer the outstanding loan amount to another bank due to better terms and conditions that the other bank can offer. This is a result of the continuous decreasing of the interest rate (base rate and spread). In any case you should take into consideration the costs of the transfer and make the analyses if the transfer of the loan is worth; comparing the costs and benefits. The costs may be:

  • closing penalty,
  • loan and mortgage contract expenses,
  • mortgage expenses,
  • property and live insurance (if applicable)
  • other costs.

The main benefit for transferring the loan is lower interest rate. Other benefits may occur depending on bank products characteristics.

11. What is the Pre-contractual information for mortgage loan?

After you have discussed with the loan officer all the terms and conditions of a mortgage loan and have agreed on these terms, the loan officer must give you all the information discussed in a written form, as per Bank of Albania regulations. This information is included in the pre-contractual form and it is tailored according to the terms you decided to choose. The agreed terms and conditions don’t change for a short period of time. You should take this document from different banks and compare the terms and conditions of mortgage loans in order to choose the best loan terms for you.