Spain’s new Mortgage Act brings a raft of changes. All changes became effective from 17th June 2019.

 

  • Floor clauses (collar clauses) will be completely removed in all mortgage loans. 
  • Repossession procedures will now only take place when a borrower falls in arrears 12 quotas or 3% of the capital for the first half of the loan. However, if the default occurs on the second half of the loan, a lender may not start a repossession before 15 quotas are unpaid (approximately 15 months) or else 7%.  In other words, as these quotas are normally repaid on a monthly basis, lenders will now have to wait at least a full year before they are able to instigate a repossession procedure against a borrower. Up until recently lenders had to wait 3 months before they could repossess. Moreover, this 3-month rule was a recent change in itself, as lenders post-crash could execute a repossession with only one quota in arrears.
  • A borrower must now visit a notary twice. The first time without a lender where the borrower will be given the opportunity to ask the Notary anything on their particular mortgage loan terms (all you ever wanted to ask on mortgage loans but were afraid to ask). The second visit will be with the lender to sign the Mortgage deed. Notaries will be ‘forced’ to pass a test to borrowers to see if they have fully comprehended the clauses of their own loan contracts.
  • The borrower will be handed over a copy of the mortgage contract at least 10 days ahead of signing at a Notary the Mortgage deed.
  • The borrower will only pay for a properties’ valuation (on average between 400 to 600 euros). Lenders to pay now for Stamp Duty on the mortgage loan, gestoría,Notary fees and Land Registry fees. Only this change unto itself translates into borrowers saving thousands of euros with this new law. 
  • Lenders may no longer tack on a mortgage loan ancillary non-requested linked financial services and products i.e. home insurance, life covers, pension plans, credit cards etc. 
  • Early mortgage redemption penalties are now capped, being significantly reduced. In plain English, you can now repay your loan ahead of time without your bank imposing a huge penalty on you. Remember that lenders’ core business is to lend money and charge interests on it; if you repay a loan much sooner than agreed, your lender loses a lot of money over time. Which is why they impose these early redemption penalties, which are now capped.