Challenging your mortgage file, a false good idea?

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Corporations give individuals large savings if they attack the institution that granted them their home loan.

It is better to be aware of the cost and the risks of such a procedure before committing yourself.

You probably do not suspect it, but there is a good chance that your mortgage agreement contains errors. “In the credit files that we analyze, more than one out of two does not respect the law,” says Laurent de Badts, founding partner of Credit Expertise.

Like other companies, this company is strong to help individuals to challenge their real estate credit, making them shimmer tens of thousands of euros in savings.

How to uncheck the jackpot? By attacking the credit institution in court. In recent years some courts (courts of appeal Aix-en Provence, Grenoble, Metz, Lyon, Paris …) have given reason to consumers.

Their judgment: the credit rate set by the bank (between 2.8 and 3% on average today over twenty years), is replaced by the legal interest rate, or 0.04% in 2014. On a loan of 240 000 euros over twenty years, the economy reaches more than 89 000 euros.

But these companies forget to say that even in case of blatant error, the individual is not certain to win every time. Above all, we must have the time and the means to carry out such a legal action.

The most common errors

Most of the errors concern the TEG (global percentage rate), which, contrary to what is required by law, does not always include all the costs that have conditioned the granting of the credit.

To calculate a TEG, the bank must add to the nominal interest rate that it proposes to you, the expenses of insurance DIIT (death, invalidity, incapacity for work), those of file or brokerage, the cost of the guarantees (mortgage or bond), but also the cost of buying shares in a mutual bank (People’s Bank, Credit Agricole, Credit Mutuel, …) because some require to be a member to grant credit.

“These share purchase costs or the amount of insurance when the customer makes a delegation to another establishment are often forgotten,” says Laurent de Badts.

The second type of blunder: simple calculation errors. For example, the total cost of the credit must be realized over a calendar year of 365 or 366 days. Some institutions still use banking years (360 days) for contracts with individuals.

Finally, there are sometimes legal errors in the drafting. For example, the TEG must be indicated by year and by a period (month or semester), whereas institutions are content to give its annual value.

Choose the right intermediary

Scouring the vein, many companies “analysis of loan agreements” have thus engulfed in this niche. With a significant risk of disappointment if you do not choose the right, because obviously, this benefit is not free.

On average you will pay between 250 and 600 euros for a complete and detailed study of your credit report. This must contain precise financial calculations that prove the error, but also useful information such as reminders to the law and cases of jurisprudence.

In short, all the useful arguments to negotiate with your bank. Be careful, some companies offer you an integral service, which goes from the analysis to the legal proceedings, and are paid on the gain obtained before the courts. Escape them, because, in this type of procedure, the use of a lawyer is mandatory. But they can not do it for you. It’s up to you to seize a court professional who will sue on your behalf.

Second step if you want to verify that your loan agreement is illegal: contact a lawyer in banking law specializing in the defense of consumers. He will verify that your case is arguably before you train in a long and expensive procedure.

It will review the legality of the legal clauses and will have the calculations redone by an expert before the courts. Pay attention to the cost: a lawyer will charge you fees ranging from 500 to 2,000 euros to examine your file. With the added costs of expertise: from 200 to 1,500 euros, depending on the complexity of the case.

Negotiate on time

If your credit agreement contains errors, you still have to attack your bank on time, because the prescription is five years after the subscription. Unless … you prove that the error was not flagrant and that you have just noticed.

But rather than attack, try to negotiate with your bank advisor by asking a commercial gesture (lower your nominal rate, cancellation of prepayment penalties, reduced rate for a future loan, consolidate payday loans).

“If you are well prepared and you can cite cases of jurisprudence, as well as a detail of calculations proving that he is wrong, you can win the case,” says Ganaëlle Soussens, a lawyer in Paris. But you must not be too greedy, because it will never grant you as much as the courts.

A lengthy lawsuit

If your advisor does not listen, the only solution is to take your case to court. Better to be certain of the strength of your file, because it will then need the services of a lawyer, mandatory in the proceedings before the high court (for more than 10,000 euros in damages). It will charge you a flat fee, as for the analysis of the file, then will take in addition between 5 and 10% of the gains obtained in court.

If you attack, take your trouble. Count on average one year before the judgment is rendered. If the bank loses, it will almost always appeal, which will take twelve to fifteen months more.

Finally, if the first judgment is validated before the Court of Appeal, the Court of Cassation remains an additional eighteen months and the use of counsel to counsel, only to be able to represent you in this Court.

In short, even if you are in your right, it is better to have a cash of 5,000 to 10,000 euros and a lot of time to hope to win.