Accounts linked to mortgages: three questions
Your linked or instrumental account is where your mortgage instalment payments are charged. We reply to three recurrent questions on this matter in this blog post.
1. Opening and maintenance: Are you required to open and maintain an account at the bank which has granted you a mortgage loan in order to pay your monthly instalments?
- If the mortgage loan contract imposes this obligation, yes. In this case, the bank should clearly inform you of this in writing before the loan is formalised.
- If this obligation has not been included in the contract, no. In this case, you can pay the instalments by arranging a direct debit from an account at another bank, by transfer or by cash deposit at the bank itself.
The bank may charge maintenance fees based on the date of arrangement of the mortgage.
2. Allocation of funds from the linked account: Do you want to cancel your mortgage early?
- If so, paying any remaining instalments into the linked account is not enough. You will have to expressly order the bank, in writing, to use such funds to cancel the loan early.
- Likewise, if your account is linked to different loans granted by the same bank (for instance, a mortgage loan and a personal loan), when you are going to make a payment you must specify in writing which specific debt you wish to settle in order for the bank to execute your order correctly.
3. Closing an account: Do you want to close the linked account?
- If you have finished paying off your morgtage, you must expressly order the bank to close the linked account. Otherwise, they may continue to charge you maintenance fees.
- Remember that if the linked account is in the name of two account holders because they share a mortgage, the consent of both of them will be required to close it (as occurs with any jointly held account). However, you may personally request your removal as a joint account holder.