The Importance of the FEIN in Mortgage Applications: What It Is and Why You Need to Know

The FEIN of a mortgage is one of the fundamental documents when acquiring a loan for a home. We tell you what it is and why it is so important.

Spain is, traditionally, a country of owners. Only around 17% of households rent, one of the lowest percentages in Europe, and 26.4% are mortgaged. There are more than 14 million people who are currently paying a real estate loan to a bank. And every year, thousands and thousands more pass through the process of applying for a loan to purchase a home, a complex and overwhelming procedure that is further complicated by the terminology that must be known: APR, fixed, variable or compound interest rates. To make your way through this labyrinth, there is a key document: the FEIN. Do you know what it is and why it is important? What data does it collect? When is it signed?

If you are thinking about taking out a mortgage, you need to know the answers to these questions.

What is the FEIN of a mortgage?

FEIN stands for: Ficha Europea de Información Normalizada. It is a mandatory document that the bank has to deliver to the client and that shows all the terms, conditions and characteristics of the mortgage. The bank writes this document after having analyzed the client’s profile and economic situation, so the FEIN is, in short, “the final offer” made to the mortgage applicant.

Why is the FEIN important?

Until a few years ago, the FEIN did not exist. Financial entities prepared other documents containing mortgage information, mainly the FIPER (Personalized Information Sheet), which showed the conditions of the loan. But these documents were not binding, so the bank could always change those characteristics of the offer later. The FIPER was more of an indicative form, and when the real estate crisis broke out, which revealed the abusive conditions of many mortgages, the authorities saw that this lack of transparency was a problem.

For this reason, the new mortgage law of 2019, “regulating real estate credit contracts”, established new standards to improve the information that clients receive and also provide more certainty and security to financial institutions. The most important characteristic of the FEIN is its nature as a “binding offer” for the bank, and whose conditions cannot be modified later. This prevents discrepancies between the offer that the client receives and the conditions of the credit that they finally sign.

For all this, the presentation of this document has become one of the most important moments in the mortgage process, as it ensures the transparency of the loan conditions and helps avoid misunderstandings or scams. The client can also rely on the FEIN to compare mortgages that the different banks propose to you and thus choose the one that best suits you, since it is a standardized document that will contain comparable information regardless of the financial institution that wrote it.

What information should the FEIN have about a mortgage?

The FEIN must be presented in a single document “with clearly legible typographical characters,” according to the law. Banks are therefore obliged to avoid the fine print.

The information it contains includes:

1. Basic information about the banking entity (name, address, telephone number, contact person, etc.) and about the credit intermediary (if any).

2. The main characteristics of the loan: the amount that would be granted, the duration, the total amount to be repaid, the value of the property, and all the variables that may affect the amount that the mortgagee will pay.

The law contemplates several situations that the bank must clarify to its client: for example, how much the mortgage becomes more expensive if the currency in which the loan was granted depreciates; or what part corresponds to interest.

3. Information about interest rates and other expenses.

This part includes:

• The Annual Equivalent Rate (APR), an annual percentage that reflects the cost of the loan and is used to compare the different offers from banks.

• The interest rate on the mortgage, which can be fixed or variable.

• If it is variable, the FEIN must include how that interest rate will be calculated and how it affects the client. The document must express it clearly, for example: if the interest rate increased to xx%, the APR could increase to xx%.

• The frequency and number of payments.

• The amount of each installment.

The bank must include an illustrative table that shows how much must be paid each month, how that amount changes over time, and how much remains outstanding after each installment.

4. Other obligations. If the bank requires you to open a checking account and take out insurance to grant you a mortgage, it must specify it here.

5. Early refund. In the FEIN, the bank must also clarify if they are going to charge you any commission for paying early, or if you can advance all the money you owe without problem.

6. The flexibility of the loan. The conditions under which you can change to another bank or extend the term, among other situations.

7. The consequences of breach of contract.

8. The ways to make claims.

Once the FEIN is submitted, the client does not have to sign immediately, nor should they. The bank must present the FEIN at least 10 days before the date set to accept or reject the offer, so the client has that time to read the contract carefully and think about their decision.

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Published by MAPFRE Retirement Blog