Changes concerning entries in land and mortgage registers are coming. Will it be cheaper and faster?
Soon there will be a big change for the borrowers concerning the entry in the land and mortgage register. Until now, taking a loan, the bank added to our interest rate an additional cost called bridge insurance. In order to understand more precisely what it is about, we will explain what this insurance is.
What is bridging insurance?
In order to make it legally binding, you need to enter it in the Land and Mortgage Register, but before the court makes the formalities it sometimes takes a few weeks or even months (in bigger cities). What does the bank do until then? It insures itself additionally and this insurance is called bridge insurance. This insurance protects only the bank.
Bridging insurance costs
The cost of bridge insurance is borne by the borrower. They are added on the basis of raising the loan margin until the entry in the book. The margin usually rises from 0.05 to as much as 2.5 percentage points, depending on the bank’s offer.
So costs also depend on:
- The amount of credit taken
- The time that will pass from the moment of concluding the loan agreement to the entry in the mortgage book
- The offer that the bank will propose. These offers may differ significantly from each other
What does this look like in practice?
In practice, it turns out that in the vast majority of cases bridge insurance is not paid out because the entry in the mortgage is made as requested. Thus, the fees that the borrower has to pay are money spent without any justifiable sense, because the banks in principle do not bear the risk. For some time, the waiting time for the entry to be made has also increased due to the growing interest in real estate (increased demand) and the number of applications, so the total cost of insurance has steadily increased.
As a result, the Ministry of Justice has started working on changing the law. According to initial reports, the fee is to be treated as a deposit, which if not used will be returned or credited towards the remaining amount to be repaid on the loan.
Another change is that the entry in the book can be made by a notary public. Thanks to this, entries will be made much faster and more efficiently, and the process will relieve the courts. The borrower will have a choice to make the entry as it was possible so far through the court or at the notary’s office.
When will the first changes occur?
According to preliminary information, the changes are expected to take place later this year. The Ministry of Justice is already working to implement such changes as soon as possible.