Euromortgage – What’s It All About?..

Property:Real-Estate

For a European seeking a mortgage to buy property in another country, the search is filled with complicated rules and often conflicting laws. Called cross-border loans, they can be a bit complicated to obtain and the interest rates are often higher than other mortgage loans.

A New Proposal

In 2005 the European Commission began consideration of a new type of mortgage that would make it much simpler for Europeans to obtain a mortgage for property at home or in another country. Called a euromortgage, it would be a universal mortgage deed available throughout the EU to people who want to buy property.

Why is this so interesting to many people? The current maze of different rates, terms and contract language make it very challenging to buy property using a mortgage obtained through a lender in another country. Creation of a euromortgage could streamline this process and give consumers access to a standard mortgage contract. It’s also likely that interest rates would become more competitive across the EU, benefiting consumers even more.

Barriers To The Euromortgage

Before a euromortgage can become a reality, there are some significant barriers that must be evaluated and overcome. These include:

• Language differences

• Disparities in local laws

• Risks of fluctuations in exchange rates

• Conflicting rules on early repayment of loans

Evaluation And Consideration

Despite the obstacles that exist now, the potential benefits of a euromortgage make it a proposal worth considering. The European Commission has launched a consultation green paper to review the existing mortgage market and begin evaluating the euromortgage concept. They will confer with with lenders and regulators throughout the EU to gather input and do a closer analysis of mortgage credit options. As of this writing, there has not been a formal proposal for EU legislation related to the euromortgage. It’s most likely that any such proposal would not be made until sometime in 2006 at the earliest.

Potential Benefits To Consumers

As mentioned earlier, a standardized euromortgage could be a real plus for consumers. The mortgage lending market would likely become much more competitive as lenders would no longer be limited to offering mortgages in their own country. Rather, they could market their lending programs throughout the EU if they so chose, giving borrowers many more options to consider.

What’s Next?

Mortgage lenders across the EU have until December, 2005, to respond to the European Commission’s green paper. It is thought that their responses, coupled with the Commission’s other findings, will lead to a decision on whether to propose formal legislation regarding the euromortgage.

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