New housing credit measures: Is it possible to renegotiate terms and stabilize the installment?
During the Government's search for solutions to help the Portuguese reduce their housing credit payments, some exceptional measures are already in place. One such case is the renegotiation of contracts with an effort rate exceeding 36% and the stabilization of the installment for two years (having to repay the differential amount later). But which one will compensate more? Can they be applied simultaneously?
If you still don't know the best solution to save on your home loan, you can always turn to a credit intermediary, such as Poupança no Minuto, to guide you in finding the most beneficial solution for you.
But let's see how these two measures related to mortgage financing work, if they are worth it and if it is possible to apply them simultaneously.
Renegotiation of contracts with effort rate higher than 36%
One of the measures in force in 2023 is the requirement for banks to present a renegotiation proposal for contracts whose borrowers have an effort rate equal to or greater than 36%.
However, not all contracts are included in this measure. This includes contracts for credit for the acquisition of own and permanent housing, with variable interest rate and a debt amount up to 300 thousand euros, under the following conditions:
- Effort rate equal to or higher than 36% if the increase was 5% in the last year.
- Effort rate equal to or higher than 36% in case the increase in associated interest rate exceeds 3%;
- Effort rate equal to or higher than 36% at the time of the last update of the installment value;
- Effort rate equal to or above 50%.
If the bank is in doubt about whether or not a borrower meets the requirements of the measure, it can request the sending of the latest IRS statement from the holder, who will have 10 days to send the documentation.
Is it mandatory to propose renegotiation? And accept it?
Due to this measure, the bank is always required to inform the possibility of renegotiating the conditions to a housing credit borrower who fits.
However, the client may not accept, as long as they continue to meet the monthly installments. In addition, even a client who does not qualify may request renegotiation voluntarily, to which the bank must comply without charging any costs.
Stabilization of the monthly installment for two years.
Another of the most recently announced measures by the Government to support the Portuguese with housing financing involves reducing and stabilizing the monthly installment for two years.
That is, based on an index equivalent to 70% of the Euribor at six months (applicable to other maturities), the installment will remain the same in the following 24 months after being applied.
This is a measure that will be in effect from the next day 2 November until the end of the first quarter of 2024, and will cover credit agreements for permanent own housing concluded by 15 March 2023, with a variable interest rate and a contract term that still extends for at least another five years.
After the request is made to the bank, it must respond within 15 days and, once the response is given, the borrower has a month to decide whether to move forward. If the bank's proposed plan is approved, the support will continue for the next two years (24 months).
What you don't pay now, you pay later
But pay attention: Note that the differential amount between what you currently pay and what you will temporarily pay will have to be refunded four years after the end of the period in which the installment will be fixed.
This differential value will then be diluted by the remaining term of the contract. If you want to anticipate this payment, you can do so without commissions or additional charges.
Can I access both measurements simultaneously?
Yes, it is possible to have access to both measures simultaneously. That is, if you want to accept the proposal to renegotiate the bank's conditions, you can do so even if you are considering accessing the new installment stabilization measure.
But what should you consider? When renegotiating the conditions, the bank may propose an extension of the loan term, if you have not reached the maximum allowed by law, a reduction of the spread in exchange for contracting other products (which may not be as beneficial compared to other options such as transferring the credit or life insurance), and a grace period for capital repayment or a deferral of capital, two solutions that have not been as commonly offered by banks due to the risk involved.
And by applying the most recent measure of the Government, you have access to a reduction and stabilization of your monthly credit payment, but the differential value will have to be repaid later.
Savings achieved by the measures may not be sufficient
In other words, it is allowed to proceed with both processes simultaneously, but still, you should be aware that you may not achieve the savings you desired with your mortgage credit.
In case it is not enough, there are other solutions, such as transferring financing and/or associated insurance, which can give you access to an even more significant budget relief.
To study your specific case and understand which option is most advantageous for you, you can turn to a credit intermediary/insurance mediator, for free, like those at Poupança no Minuto. Contact our services for realistic simulations and save as much as possible on your expenses!