NEW SPANISH MORTGAGES LAW
WHAT YOU SHOULD KNOW ABOUT SPANISH NEW MORTGAGES LAW?
On June 16th will come into force the new Regulatory Law on Real Estate Credit Agreement in Spain, as planned, 3 months after its publication in BOE ("Boletín Oficial del Estado"); This will bring changes to the mortgages contracting process. In this article, we tell you some of the most widespread regulations and commented on by the media.
1. Distribution of payments
With this new mortgage law, new premises for the mortgages granting will enter into force, such as the distribution of payments between the financial institutions and the client:
The bank must be responsible for paying the administrative expenses, the registry, the notary, the "IAJD" (or Tax on Documented Legal Acts), and its deed copy, while the client must pay the property appraisal and his deed copy.
2. Strict regulation for evictions
This is one of the newest measures of this new mortgage law; the regulatory article of the early expiration clause which orders the property seizure after a repeated default of the owner determines stricter requirements for its activation.
The new law establishes that, if the entity wants to exercise its right to early maturity, unpaid installments must exceed 3% of the capital granted or 12 monthly installments, if the default occurs in the first half of the loan's life, and the 7% of the capital granted or 15 monthly installments if it occurs during the second half.
3. Early amortization, limitation of maximum commissions
The maximum commissions to be paid by the banks to customers who decide to carry out an early amortization of a fixed rate loan are limited. Specifically, up to 2% of the amortized capital for the first 10 years of the loan's life and 1.5% if it is carried out after those ten years. The prepayments' commissions in variable rate mortgages, already established by law, will also be reduced to 0.25% if the debt is early amortized during the first 3 years of the loan's life or to 0% if it is made after.
4. Variable to fixed conversion costs
With the new Mortgages Law, customers who want to convert their variable mortgage to a fixed rate must assume no more than 0.15% in commissions. This procedure, previously unregulated, will serve to enhance fixed-rate loans in Spain.
5. Products linked to mortgages
With the new Regulatory Law on Real Estate Credit Agreement, financial entities are prohibited from forcing the client to contract other products (such as an insurance, pension schemes or credit cards) to access to a mortgage loan; but, they will be allowed to lower the loan's interest on condition of subscribing some of their services.
On the other hand, there are some products excluded from this prohibition: entities may require the client to take out home insurance, life insurance and/or payment protection, with the condition that the contracting party decides with which company wants to subscribe these products.
6. The floor clause
With this new mortgage, law entities can not re-incorporate the "floor clause" in variable mortgage contracts, its application is strictly prohibited because it was considered in several judicial resolutions as an "abusive clause".
7. Multi-currency mortgages
In multi-currency mortgages (granted in other currencies), holders will have the full right to convert them into euros whenever they wish. In addition, entities will be required to inform them on a regular basis about the increases that occur due to the increase in the currency value against the euro.
8. Full right to receive all contract's information
Customers will be able to read the contract and reflect on contract and its clauses compliance for a period of 10 days, being able to request all the necessary information to the lender. The Entity will also have the obligation to offer other banks information. Also, the Notary will have to attest that the borrower understands and agree to the documents' content he signs.
With the new Regulatory Law on Real Estate Credit Agreement, this 2019 the mortgage contracting regulations in our country are modified; this fact will enhance the real estate sale and purchase and will reinforce the customers' rights and the banks' obligations.