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6 Big Changes in Spanish Mortgage Law: What's new
Spain’s new Mortgage Laws are in force from June 17th. Whether you are dreaming of a modern Ibiza apartment, a rural home in the quiet countryside or the perfect family villa, you need to know the facts. In this article, we discuss the main changes brought about by this new law that you should be aware of if you’re planning on applying for a mortgage loan in Ibiza.
1. EXPENSES
The banks have to pay most of the expenses, except for the valuation. In details, the bank has to pay for the administrative agency’s fees, stamp duty, the notary, the taxes. This is a big change as the customer in the past were supporting most of the costs.
2. DRAFT BEFORE SIGNING THE FINAL LOAN
The bank must deliver the mortgage’s draft to the client 10 days before the agreed signing date. This way, the notary can ensure that the mortgage loan complies with current legislation and that the client understands the loan’s contract. The advice given by the notary will be free of charge.
3. EARLY REPAYMENT BECOMES CHEAPER
In a variable mortgage, the maximum charge for early repayment can be one of these two options:
25% only during the first three years of contract life
15% only during the first five years of the loan term
In a fixed mortgage, the maximum charge for early repayment can reach the following limits:
2% during the first 10 years
5% for the rest of the term
4. COMMISSIONS FOR DELAY
Commissions for delay may not exceed three times the legal interest of the money. This measure is retroactive, this means that both the current mortgaged and the future, will be subject to these changes. If you have been charged interest for late payment, you can go to the bank to claim the refund for said penalty.
5. EVICTION PROCESS IS DELAYED
The bank will not be able to start a foreclosure process on a property until the client’s default exceeds 12 monthly payments or the amount due exceeds 3% of the loan during the first half of the mortgage’s life. After that time, the term is 15 monthly payments or 7% of the loan’s principal. Up until now the bank was able to initiate the process prior to eviction if the client had not paid three instalments.
6. LIMITS ON LINKED PRODUCTS
This point has caused a lot of confusion in the implementation of the new law. In a simple way it means that banks are not allowed to force clients to purchase other products in exchange for giving a lower mortgage rate if these products are also purchased from them. However, “combined offers” are allowed, that is – banks are still able to offer products which represent an improvement on the loan conditions.
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