Real estate mortgage financing in Spain

Without retroactive effect, the new law came into force this week and offers more transparency and protection to the borrower. For Spain, it is above all a question of complying with a European standard that dates back to 2014 and which aims to improve access to mortgages with a clearer and stricter legal framework. The new regulations published in the Official Bulletin limit the costs related to the subscription of a loan with mortgage for a natural person. Thus, some fees, previously at the [...]
For Spain, it is above all a question of complying with a European standard that dates back to 2014 and which aims to improve access to mortgages with a clearer and stricter legal framework. The new regulations published in the Official Bulletin limit the costs related to the subscription of a loan with mortgage for a natural person. Thus, certain costs, previously borne by borrowers, will now have to be paid directly by the bank, such as notary fees and taxes related to the loan itself. From now on, it is the bank that will pay these fees. Those relating to the valuation (the tasación) remain the responsibility of the borrower.

Fewer penalties for non-refunds. In case of late repayment, penalties could reach more than 25% of the amount, but with the new regulations this penalty is limited to 3%, which will lighten the burden on households in difficulty.
To prevent these repayment problems, bank advisors will be required to assess more strictly the sustainability of borrowers' income as well as their level of debt, wealth and banking history.

The new law promulgated aims to reduce the number of seizures made by tightening the criteria for granting loans on the one hand, but also by tightening the conditions allowing the bank to activate the mortgage guarantee and therefore the seizure of the property. To encourage banking institutions to reach an amicable agreement with their customers, the minimum threshold of unpaid debts to seize a property will now be between 3% and 7% of the amount initially borrowed or they will have to wait for the non-repayment of 12 monthly payments.

Another important point is that the bank will no longer be able to force its customers to subscribe to other products such as life insurance, home insurance, pension plan or credit card. If taking out home insurance or life insurance can of course be required by the bank, the customer will now be able to choose his provider.

Better informed
Another novelty, that concerning the reflection period related to a mortgage loan contract: it is now 10 days instead of 3 or 4 previously. The objective is to allow future borrowers to study the documentation that will be given to them and explained by the notary in order to decide with full knowledge of the facts. Among the documents that must be provided: the loan contract of course, but with precise and clear details of the fees and interest to be paid as well as a note on the rights, guarantees, exclusions of the insurance subscribed by the borrower.
Finally, other measures regulate mortgages with the prohibition of applying a minimum interest to a variable rate mortgage exit the famous and dubious "Clausura del suelo" which has penalized so many borrowers.

The new regulation, in force since 16 June 2019, aims to promote access to property with a legal framework similar to other countries of the European Union.
Laurence Lemoine - Source: Le Courrier d'Espagne