10 keys of the new Spanish Mortgage Law
On Monday, June 17, the new Mortgage Law came into force, whose main novelty is that it requires entities to assume the expenses of notary, admininstrator and registry, which will allow customers to save an average of between € 500 and € 1.000, among other novelties.
Among the most striking novelties, the new regulation establishes that from this date it will be the banks and not the clients that will have to face the payment of the first copies of the notary, the expenses derived from the registry and those of the administrator; incurring in a reduction of the interests of delay and of early amortization; and increasing the months of default before a loan is executed. These changes will mean for the client an approximate saving of between € 500 and € 1.000 on the loan granted.
This law substantially modifies the keys of the current Mortgage Law, so at Villas Internacional we want to tell you the main novelties that you must take into account if you are thinking about applying for a mortgage to an entity in Spain:
1 What are the objectives of this modification of the law?
The main objective of the new Mortgage Law is to guarantee the protection of consumers when signing a loan of these characteristics with their entity. After the previous economic crisis, caused largely by the bursting of the housing bubble in 2008, both national and European authorities want customers to fully understand those contracts signed and not exposed to abusive clauses as they had to assume for expenses of formalization, interest for late payment or the already known ground clauses.
2 What type of contracts is applicable?
The new law affects mortgage loan contracts whose borrower or guarantor is an individual and the mortgage falls on real estate for residential use. Also when the purpose of the loan is to acquire or retain property rights over land or buildings built or to be built as long as the borrower or guarantor is a consumer.
3 How does the new law work?
The supervisors of the entities and offices will have to be examined in the middle of next July on the new Mortgage Law, while the rest of the employees have a margin of one year to approve these exams that will guarantee their advisory capacity regarding the sale of mortgage assets.
In addition, relations between banks and notaries are closer. The entities must introduce in the technological platform of the notaries the contractual conditions that they offer to the interested ones so that later the public notaries can inform their clients in a personalized and detailed way, without the presence of representatives of the bank.
Notaries must inform clients free of charge about the conditions and precise clauses of the mortgage loan offered by their bank within a maximum period of 10 days, perform a citizen’s comprehension test and reflect those conclusions in a notarial deed.
4 How is the new distribution of expenses established?
Most of the expenses derived from the hiring of a mortgage, which until now mainly fell on the client, will be charged to the bank. Notary, administrative and registry expenses correspond to the entity, while the client will assume exclusively those of appraisal and those of notarial copies.
5 Will the dation in payment be affected?
Yes, the dation in payment will be voluntary and will be applied exclusively if this is established by both parties.
6. And the floor clauses?
The new law eliminates the floor clauses , one of the most controversial figures in this type of contracts.
7 How does it affect bank remittances?
The new Mortgage Law also limits the commissions for early amortization of the loan with maximum levels. From last Sunday 16, these commissions will vary depending on the interest rate that includes the mortgage and the moment in which the amortization is carried out.
In the case of variable rate mortgages, the commission will be a maximum of 0.25% of the amortized capital in the first three years and 0.15% during the rest of its life; for mortgages at a fixed rate, the maximum commission will be 2% in the initial ten years and 1.5% in the rest of the loan.
8 And the eviction policies?
The eviction procedure will be hardened. For an entity to exercise it, the unpaid installments must exceed 3% of the capital granted or 12 monthly installments if it occurs in the first half of a loan, and 7% of the capital granted or 15 monthly installments if it occurs during the second half. In addition, it is required that the lender has requested the outstanding payment to the borrower granting him, at least, one month to face the pending payment.
The Bank of Spain has already warned on several occasions that this delay in the recovery of unpaid debt for banks could result in a certain tightening of the conditions applied to clients with higher credit risk profiles.
9 Will I have to continue contracting other products of the entities?
No. The consumer will no longer be obliged to contract with the bank that provides the mortgage other related products such as home insurance, other insurances or retirement plans. This does not rule out that, as up to date, certain entities incentivize the clients with bonuses in the loan in exchange for contracting some of their products.
10 What happens if I want to cancel my mortgage early?
In this case, two aspects will be taken into account:
– If the default occurs in the first half of the loan, the early maturity is accepted in the event of default of 3% of the amount of the capital (therefore, for a loan of 150,000 euros, the early maturity is allowed as of the non-payment of 4,500 euros). Likewise, it will be admitted when the non-payment is accumulated for 12 months.
– If the default occurs in the second half of the loan, the early maturity is allowed if the unpaid amount amounts to 7% of the capital granted (of a loan of 150,000 euros, the maturity would be allowed from the default of 10,500 euros). Likewise, it may occur when the default accumulates at least for 15 months.
It must be borne in mind that this reform will not affect the credits already signed where an execution has taken place.
In Villas Internacional we advise you on the conditions of your mortgage and inform you in your language so that you have a complete knowledge of the procedure of buying or selling your property. We specialize in all legal aspects derived in real estate operations of villas, luxury villas, apartments, luxury apartments, flats and plots, and we take care of the entire process from A to Z. We are your real estate specialist in the Costa Blanca, with real estate in Altea, El Albir, Alfaz del Pi, La Nucia, Moraira, Javea, Benissa, Parcent, Alcalali, Callosa, Alicante, Finestrat and much more. Contact us and we will advise you without any obligations.