As part of a mortgage, it has long been mandatory to domiciliate his income from the lending bank. Today this constraint is in its last days and has already been modified to make it easier to apply for a mortgage without having to change banks.
What is pay domiciliation?
Originally, domiciliation meant the bank where checks could be paid. The term has remained today with a different meaning, namely the bank where wages are paid. This is done by transfer and can also involve transfers other than salary – such as CAF payments – as well as direct debits.
For banks, this domiciliation is a major issue. This is the guarantee to regularly see payments of money but it is also the possibility of making money with Aldibank fees which correspond to the fees charged by the banks to each operation.
Domiciliary salary or not? Legal uncertainty persists
The domiciliation of the borrower’s salary requested by certain banks for the purchase of a mortgage is governed by imprecise rules. Thus, we do not necessarily know the required duration of the domiciliation. Is it for the duration of the loan or only a few years?
However, in 2004 the Unfair Contract Committee published a recommendation – no. 04-03 – stating that a domiciliation of wages until the end of the loan must correspond to a counterparty. Without this, it is an abusive obligation.
For real estate loans contracted after 1 January 2018, credit institutions must state their domicile for granting conditions. If this is not the case, the establishment is outlawed. The bank no longer has the right to impose this domiciliation without consideration as a credit rate more interesting. The contract must also contain a clause relating to opening bank fees and bookkeeping.
To know again, the duration of the domiciliation can not exceed ten years. Beyond that, you keep the acquired benefits and can change banks. If you break the contract before, you will lose the benefits immediately.
The future of domiciliation
Even if the conditions of the domiciliation in case of demand for mortgage have evolved these last months, one can ask the question of the future of this domiciliation. The borrower can still lose his benefits if he does not respect the ten-year term. He is then linked to his bank, which is detrimental to banking mobility, as recommended by European directives. The AFUB (French Association of Bank Users) has also asked the court of justice of the European Union to rule on this problem.
Consumer groups have also denounced the preferential rate put forward during the negotiation. Current rates are indeed very low, this “advantage” is in fact an illusion to “attract” the customer. The future will have to specify many more conditions so that the customer is not harmed. In the meantime, to take advantage of low interest rates and take out a mortgage with the best repayment terms, real estate credit brokers help their clients in their search for financing. They question the lenders through a comparator who finds, according to the needs and the project informed, the most interesting offer.