“Right now, it’s a long, winding journey with seven stops to refinance a loan.” And in order to refinance the existing housing loan, the user must apply to a new potential lender for refinancing, choose a property appraiser, etc.,” said G. Šimkus at the press conference held on Thursday.
“We propose to shorten the path, first of all, by abandoning the submission of the mandatory property valuation report. Second, by obliging creditors to cooperate, the original creditor should provide data to a potential new creditor within a set period and free of charge. Meanwhile, the new creditor should struggle. (…) The client will decide which offer is better,” he explained.
Among the proposals, G. Šimkus also mentioned the possibility for the user to refinance the loan without compensation, to repay the former loan, not on the day of the interest rate change.
“The simplified refinancing process must be free for the consumer. The valuation of independent property for the consumer, which currently costs 200 euros, would be taken care of by the new creditor when needed. The fees of the Notary, Registry Center should be attributed to the new creditor, we also have to abandon the direct fees that are now being applied by creditors,” said the Chairman of the LB Board.
“We also propose to establish the possibility for the consumer to refinance the loan without compensation, to repay the old loan on a date other than the interest rate change,” he highlighted.
According to the Chairman of the Board of LB, in order for the changes to be implemented, amendments to the Credit Law will be needed, which will be prepared by experts.
“The user would no longer need to wear clogs and pay for them. Substantial facilitations, both procedural and financial. Procedures will be simplified, as part of the steps in the process are transferred to creditors, and the essence of financial facilitation is to make the process free for the consumer. The old and new lenders would not be able to apply their own fees to the user,” said G. Šimkus.
“In order for this to happen, changes to the Credit Law related to real estate are needed first. Our experts will prepare amendments to the legislation,” he emphasized.
G. Šimkus is convinced that the changes will ensure that the client will have not theoretical but real freedom to negotiate, choose and not overpay.
“Refinancing would save significant sums of money for a large part of the population who currently have housing loans. However, it is unpopular, but people do not use this option, not because they do not care about money, but because the refinancing procedure is complicated and expensive. Removing these flaws would make it easier for people to take advantage of a more favorable market and individual situation,” assured the chairman of the LB board.
“In the current market conditions, loan refinancing would benefit at least half of those with home loans, and if it were possible to reduce the refinancing fees applied by consumers, there would be even more winners and it could be more than two-thirds, approximately 160 thousand. of Lithuanian households with housing loans”, he said.
G. Skaistė: the draft law should appear in the Seimas at the beginning of the autumn session
Finance Minister Gintarė Skaistė assured that the draft law will be coordinated with market representatives and state institutions during the summer, and it should go to the parliament at the beginning of the autumn session.
“We hope that during the summer we will be able to harmonize the draft law both with the market and with other state institutions. The goal would be to start with this draft law at the beginning of the autumn session of the Seimas, so that next year we can take advantage of the opportunities provided by this new model,” said G. Skaistė.
“We hope that it will stimulate competition in the mortgage market and perhaps allow new players to participate more actively, where today they have a relatively smaller market share,” she assured.
G. Skaistė noted that the essence of the proposal is an opportunity for a person to refinance a loan and save money.
“For a person taking out a loan, a home loan is the longest financial commitment in a lifetime. The longest possible loan period is about 30 years, it is a fundamental decision for a person. Interest and margins on loans change during such a period, while it is quite difficult to change banks and refinance loans,” explained the minister.
“The essence of our proposal is that a person has a greater choice and if the market situation changes, that a person has the opportunity to refinance the loan and in that case save money,” she emphasized.
It is planned to determine the obligation of the original creditor within a certain period and provide the relevant data to the new creditor free of charge – the user would no longer have to worry about bank statements. Also, establish the possibility of repaying the loan without compensation not only on the day of the interest rate change – loan holders could basically refinance the loan at any time without incurring the costs of early repayment of the loan to the original creditor.
The proposals of the Ministry of Finance and the LB state that consumers would no longer need to provide a new creditor with a new real estate appraisal of the refinanced loan – if necessary, the new creditor would do it at its own expense. The creditor refinancing the loan would not be able to charge the loan agreement fee, and the consumer would not have to pay any fees for notary services and deregistration and registration of the mortgage, which would be paid by the new creditor.
