A new mortgage law, created by the Spanish goverment, came into force in June 2019. It makes the mortgage process more transparent for the consumer and to clearly establish the conditions. That means to determine who pays what costs and who is responsible for what.
New distribution of costs
The cost of setting up the mortgage, simply put the cost buyer are from now on behalf of the bank. These are briefly the costs for the deed of the loan, the gestoria, the registration in the land registry, the AJD tax and a copy of the hypotheekakte. Please note that the costs relating to the purchase like the transfer tax, the costs for the deed of sale, the notary, the gestoria and the register remain at the expense of the buyer.
Please note that the following costs related to the purchase remain at the expense of the buyer:
Costs for the deed of sale
More consumer protection
The bank must provide you with the terms and conditions in the European Standard Information Sheet (FEIN), a document that is a binding offer for a minimum of 10 days. At the same time, you must provide the FiAE, which clearly explains the most relevant clauses or terms, a copy of the contract and, if the mortgage is variable, a separate document with the fees you pay in different scenarios.
The new Spanish law also request that the person applying for the mortgage must visit the notary. The client will go at least one day before signing to receive free advice and perform a short test. This shows that you have understood all the information. The notary may not allow the deed to pass if the test has not been successfully completed.
The conditions for early repayment are more favorable and are clearly laid down in the law. In addition, it can only be charged if the bank can prove that it has suffered a financial loss during the term of the loan (in the case of fixed interest). The fines are different, depending on whether the mortgage is variable or fixed:
In the case of a variable mortgage, the maximum commission can be one of two options:
0.25% only during the first three years of maturity
0.15% for the first five years of maturity
After these three or five years, the committee is 0.00%
Penalty for early repayment of a fixed-rate mortgage:
2.00% for the first 10 years
1.50% for the remainder of the term
Incentives to move from variable to fixed rate
The new law makes the conditions for the transition from variable to fixed rate a lot more favorable, whether it is a novation (a refinancing with the bank itself) or a transfer to another bank. The maximum commission that can be charged in this case is 0.15%, only if the change occurs during the first three years of the loan term.
The freedom to switch banks
It is one of the most eye-catching measures in the new Spanish mortgage law. In the process of subrogation, if our current bank makes a counteroffer equal to or better the offer of the other financier with which we negotiate, we are no longer obliged to accept it as was previously the case. That is, we are free to choose the bank we consider most appropriate.
Extension of period for the confiscated names of the house
The bank cannot put the expropriation process into bed until the following limits have been reached:
Until the backlog reaches no more than 3% of the capital or the equivalent of 12 unpaid mortgage payments.
In addition, a maximum default rate of 3 percentage points is set above the remuneration rate, i.e. that of the mortgage itself.
Restrictions on linked products
The regulations prohibit related sales in order to receive the agreement for the mortgage application. That means mortgage insurance, pension plans, credit cards, etc.
However, it does allow the bank to offer products in exchange for interest reduction,
In addition, the binding prohibition of sales provides for two exceptions:
Banks can claim non-life insurance and/or life or payment protection. However, the customer is free to contract it with the company to his/her.
They can also link the mortgage to products that have been proven to benefit the customer. The Bank of Spain will have the opportunity to decide which services fall into that category.
As far as the combined sale is concerned, the entities are required to make two separate offers. The client can compare prices correctly: one with the bonus and one without.
0.00% bottom rate standard
The new mortgage regime specifically prohibits the application of a minimum interest rate on variable mortgages. Therefore, banks can never re-enter the known soil clauses and should not consider a euribor at 0% if it is negative. However, a minimum rate of 0% is set by default for all home loans.
Multi currency mortgages, i.e. loans provided in other currencies, also have their prominent place in the new law. The owners of these products have the right to convert them into euros whenever they want.
Financial intermediaries /Mortgage Advisors
Establishment of a register where all financial intermediaries and mortgage advisors must be notified. This register is managed by the Bank of Spain.