Private Capital: Mortgage and debt consolidation
Can a private person grant a mortgage?
The answer, without any doubt, is yes.
Private loans with mortgage guarantee are regulated by the Civil Code and other general regulations that regulate this legal concept and, specifically, by Law 2/2009 of March 31, which regulates the contracting with consumers of loans or mortgage loans and brokerage services for the execution of loan or credit agreements (see BOE in PDF).
Law 2/2009 regulates both financial intermediaries, who provide a management, advisory, and negotiation service between the client and the financial institution, as well as the so-called private lenders (who leave money to a private individual with the guarantee of their home). Two different realities regulated in the same standard.
This regulation has been criticized for several issues, among which the obligation of financial intermediaries to submit three binding offers or to leave the supervision of intermediaries and private capital in the hands of the Consumer Authorities of each CC.AA.
It must be said that until the corresponding Regulation is released there is part of the regulation that has no application in reality.
What are private lenders and what are they not?
First of all, we must understand that private capital is neither good nor bad. It is an extreme financial option for very specific situations. They are individuals or companies that leave money to an individual or family at very high interest rates (30% per annum is not the highest they charge), based on the high risk of default associated with the operation, in very short terms ( 6 months or 1 year) and with the guarantee of the indebted’s home.
Currently, given the lack of liquidity of private lenders and the greater risk of default (it is very complicated to be able to redirect later via traditional bank mortgage reunification), they usually grant these loans at an appraisal percentage equal to or less than 50 %. Very indebted people, therefore, is no longer an interesting client for private lenders.
The operation is, for the owner of the house, of very high risk. You have to be very clear that you will lose your home via auction if you can not get the money that the lender has left you, via bank, selling the house before or by any other means. You should never resort to this financing without the professional advice of a lawyer, economist or professional specialized in these matters. The opposite is, in my view, financial suicide.
Private lenders are not Debt Reunifiers. The debt reunifies are specialized financial intermediaries in processing mortgages that reunite card debt, personal loans, and mortgages in a single new mortgage. In the cases of customers with unpaid bills, RAI or Asnef, what these companies do is to first intervene with a private lender that grants a mortgage for 6 months or 1 year, and then reunify this single mortgage in a new bank mortgage (the expenses of this operation are very high).
The big problem is that there is no guarantee that after the private capital any financial institution grants a new mortgage. Therefore, the risk of losing the home is very high.
Requirements to the Private Capital of Law 2/2009
Among other obligations, whose purpose is to protect and give transparency to the users of these companies, are:
- Register in a State or Autonomous Public Registry with Internet access (to be created), stating your name, activity, territorial scope, and insurance or guarantee data that you will be obliged to hire to protect consumers of possible bad practices. It must also include the prices of the services, the fees of the commissions or compensations and expenses that can be applied, at most, to the operations and services they provide, and the maximum interest rates of the products they market, including, where appropriate. , the interest rates for the delay. Therefore, if the Private Equity company we go to is not in this registry, we should not go through the door.
- Be transparent in contracts and pre-contracts, obliging to have in view and on the web the general contracting conditions.
- There is freedom to charge commissions and interest, always respecting the law and expressly the mortgage regulations that limit the commission for early cancellation.
- Regarding the publicity of debt reunifications (with private capital or directly with a banking entity), advertising of the type “reunify all your debts and pay up to 50% less” is prohibited without clarifying that this monthly reduction is an increase of the term of the mortgage, some expenses and an increase of the total financed.
- Give the client, in advance of the signature before a notary, the corresponding binding offer (a document that obliges him to comply with the conditions of the mortgage contained therein), to avoid surprises on the day of signing.
- Notaries and registrars are required not to accept private mortgages that do not comply with this law.
In short, it should be clear that private lenders are regulated by law, must comply with a series of formal requirements and never have to go to them without the advice of an independent professional, given the complexity and danger of the loan operation private mortgage
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