Property debt background debt

Your own property or your own property offers excellent security for credit institutions. And high collateral goes hand in hand with low risk to the bank, reflected in a favorable interest rate. For the taking up of a loan, the home offers itself as security so officially. So that the security is also recorded in writing, it is necessary to enter the loan as a mortgage on the house. This is done at the land registry, which enters a mortgage. If the property is currently unencumbered and the lending bank is the first to be registered, it will be ranked first. That is, in the case of a case, for example, a foreclosure sale, the first-ranked registrant is preferred and gets the money first. On the other hand, if the auction does not bring enough, it may be empty. If the mortgage is paid off at some point, it will be deleted. The registered mortgage remains however. See http://ayaaaak.net for an illustration

Mortgage has no debt

Mortgage has no debt

However, it does not necessarily have to be a bank in whose favor a mortgage is registered. Even a homeowner can do that by registering a landlord’s lien on his property. Under German property law, the landlord’s lien is therefore a mortgage, which is entered in the land register in the name of the landlord. Since a mortgage has no debt – that is, a mortgage is not a repayable loan – any landlord or landlord can register a landlord’s lien without incurring any monthly costs, as is the case with a mortgage , For the following reason, this makes sense first and foremost with an empty lot:

A landlord’s lien gives the landlord the opportunity to secure a “pole position” for (later) targeted borrowing. As just described, a high rank offers some benefits. For example, the owner may offer his first mortgage to a credit institution, resulting in a loan with more favorable terms than subordinated debt. Especially with a Eigentmer-letter Grundschuld a quick securing means is available. The owner can therefore at any time provide security for a loan by transferring the mortgage deed to the bank. The beneficiary no longer has to be entered in the land register, so that there are no additional costs due to a rewrite.

Repayment of the loan

Repayment of the loan

In order to own a landlord’s own debt, the passage to the land registry office is not necessarily required, because this can also arise by virtue of law. As we have already seen, a mortgage is always associated with registering a mortgage. If, however, the secured claim is extinguished in whole or in part in the case of a mortgage, for example by repayment of the loan ( 1164, 1177 BGB), then the “free parts” of the mortgage are automatically converted into a landlord’s lien. It is available to the owner for further use.

However, this provision only comes into effect if there are no other (equal or subordinate) land charges of third parties apart from the landlord’s land charge that has just arisen on the property. Should this be the case, the owners of the subordinated land charges can claim a statutory cancellation of the landlord’s land charge. This is regulated since 1977 in 1179a BGB. If such a claim is asserted, then the owner must cancel his own landlord’s lien. The purpose of this regulation is to allow equal and subordinate land charges to be called. This claim for indemnification may be excluded by contract; but this requires the entry in the land register.

Consumer creditworthiness not properly checked

When taking out a loan, most people quickly think of a visit to the bank. Or to request a quote from an online loan provider. But since fairly recently (as of January 1, 2017) a mobile phone that comes with a subscription also counts as a loan. And from last May (2017), telecom providers must perform a credit check if a customer purchases a mobile phone with a value of more than 250 euros. The idea behind it is self-evident that consumers will not enter into obligations that they cannot handle financially. So far all nice and nice, but do the new rules work? The AFM (Financial Markets Authority) was curious about that. And when the AFM started investigating the way in which telecom providers dealt with the new rules, it turned out that things could still be improved.

Amounts are entered as standard

Amounts are entered as standard

The research shows that most telecom providers have already set a number of amounts in the form on their site in advance. Clients must state their family situation and, based on this, (monthly) expenses and income will come forward. The idea is that the consumer then adjusts the amounts so that they match reality. In itself a nice service from the telecom provider, because the less a consumer has to fill in himself, the easier and faster it goes of course. But then it is of course useful if the customer actually checks the amounts and does not simply confirm the amounts entered in advance. And there it turned out to go wrong quite often in the research.

Completed forms lead to over-credit

Completed forms lead to over-credit

The AFM investigation revealed that many customers do not adjust the standard amounts to their actual financial situation. Logically you get a financial picture that is not right. You could even say that completing the creditworthiness test is of no use in this way. This test must make it clear whether someone can safely take out the loan (in this case the telecom subscription) without getting into trouble. That of course only becomes clear if the data is actually correct. The AFM therefore concluded that forms on which advance amounts were entered as standard could lead to over-credit. In short: a risk was created for the consumer in this way.

Telecom providers must stop entering data in advance

Telecom providers must stop entering data in advance

Because the AFM considered the risk of over-crediting too large, the telecom providers were called to account for this. The AFM has forbidden them from already filling in the forms for the credit check in advance. In the meantime (almost) all telecom providers have listened to the AFM and no more amounts are entered in advance. The AFM has indicated that it will also check with other financial products what the effect of entering data in advance will have on the consumer.