If you need a mortgage to buy your home and request it from your bank, they will provide you with a financing proposal. The conditions of this proposal are detailed in a document: FINE.
Since the FINE (European Standardized Information Sheet) contains all the relevant information about the mortgage loan you intend to take out, it’s essential to know how to interpret it to make an informed decision.
FINE Contains Standardized Information
Before 2018, if you requested mortgage loan proposals from three financial institutions, you would likely receive three documents with different formats and content, making it harder to compare and decide.
However, this changed in 2018 with the introduction of Decree-Law No. 74-A/2017, which mandated a standardized document format for all financial institutions across the European Union—FINE. This standardization allows for easy comparison of different mortgage proposals.
What Information Does the FINE Contain?
The most important information focuses on the loan’s characteristics and costs, but the FINE also includes details about the proposing financial institution and relevant legal aspects, such as the right to cancel and the validity period of the proposal.
FINE is divided into two sections: Part A and Part B, both of which are crucial for analyzing the bank’s proposal.
PART A
Part A contains 15 sections, with the following being the most relevant:
Section 1 – Lender
This section includes the identifying details of the financial institution proposing the loan—name, address, contact details, and website.
Section 3 – Key Features of the Loan
This section includes:
- Loan amount
- Loan term
- Loan type and purpose (e.g., purchase of a primary residence, second home)
- Repayment method, including the number of installments and required guarantees (e.g., mortgage on the property, guarantors)
- Interest rate type (fixed, variable, or mixed). For variable rates, it details the calculation method and review period.
- Total Amount Payable by the Consumer (MTIC), which shows the total amount you will repay the bank.
- Estimated property value, which is the basis for determining the loan amount.
Section 4 – Interest Rate and Other Costs
Here, you will find the Nominal Annual Rate (TAN) applicable to your loan on the proposal date. Note that for variable-rate loans, this rate will change during the review periods based on the index rate.
More important than the TAN is the Annual Percentage Rate of Charge (APR or TAEG), also included in this section. The APR includes all loan-associated costs, such as bank fees, taxes, other expenses (e.g., certificates and notary fees), and required insurance.
Section 5 – Payment Frequency
This section specifies the frequency of payments (monthly, quarterly, semi-annually, or annually) and their number, which depends on the loan term and payment schedule.
Section 6 – Installment Amount
This section states the value of the first installment. For fixed-rate loans, this value remains constant throughout the term. For variable-rate loans, the amount changes during interest rate review periods.
Section 7 – Indicative Repayment Plan
This refers to the detailed repayment plan provided in Part B, which is critical for understanding the proposal.
Section 8 – Additional Obligations
This section outlines additional requirements for the contract, such as having a current account with the institution for installment payments and purchasing required insurance (e.g., life and property insurance).
Section 9 – Early Repayment
Here, you’ll find details about early repayment options (usually aligned with installment payment dates) and any fees that may apply.
Section 11 – Default and Consequences
This section explains the costs and consequences of default, such as reporting the default to the Central Credit Register of Banco de Portugal, foreclosure on the property, or legal action.
Part B – Additional Information
Part B contains additional details required by Banco de Portugal, such as whether optional associated sales are involved (e.g., requiring debit or credit card contracts) and the documents needed to formalize the loan contract.
The most critical aspect of this section is the two repayment tables, Table A and Table B.
Table A
This table includes the repayment plan assuming the interest rate remains constant throughout the loan term. It details:
- Monthly installment amounts, breaking down how much goes toward principal repayment and how much covers interest.
- Outstanding balance after each installment.
Additionally, it lists two amounts not included in the installment:
- Taxes.
- Other costs, such as monthly insurance payments tied to the loan
Table B
This table has become increasingly relevant due to rising interest rates, as it simulates payments if rates were to reach the highest level recorded in the past 20 years.
Get in touch with Lead Kash
Want to save money on your mortgage? We offer the ideal solution to help you achieve that goal. Lead Kash handles the entire process for you, from interpreting the FINE to comparing offers from different institutions. Best of all, this service is free for you! Request a simulation, talk to us, and let us simplify your life.
