Changes to Mortgage Law in 2019
The new Mortgage Law came into force in Spain on 16 June 2019. This new regulation is born as a result of an EU directive to bring mortgages in Spain and all EU lending across member states into line, and especially to improve the transparency and behaviour of mortgage lenders.
What are the main points and advantages of the new mortgage law?
Greater debtor protection and information
The lender has to provide all the conditions contained in the European Standardised Information Sheet (FEIN), as well as provide the Standardised Warning Sheet (FiAE), with all the clauses of the mortgage and a copy of the mortgage contract.
The debtor will receive the mortgage contract at least ten days before signing the mortgage deed before a notary so they have plenty of time to consider the terms and conditions of the mortgage.
Distribution of the expenses and costs of the mortgages
Another great point is the new distribution of mortgage expenses. With the new law, the borrower will only pay for the property valuation, which typically is between 400 to 700 euros. The rest of the expenses such as stamp duty, notary and land registration fees of the mortgage will be paid by the lender, all of which is good news and represents an important saving for Spanish property buyers.
Goodbye to floor clauses (clausulas suelo)
Floor clauses are now formally forbidden by law. In those mortgages with variable interest rates it is forbidden to set a limit on the lowest interest rate. Although the minimum interest will be set at 0%, it can never be negative.
Subrogation and novation – freedom to change lenders
The borrower can change lenders and improve their mortgage conditions whenever they want without cost and freely.
Early repayment fees are reduced
Depending on the type of mortgage, one or the other will be charged.
– If it is a fixed mortgage, it will be 2% for the first 10 years and 1.5% for the rest of the term.
– If it is a variable mortgage, there are two options: 0.25% during the first three years of the contract term or 0.15% during the first five years of the loan term. After this, the rest of the term will be 0%.
The role of the notary
The role of the notary becomes very important. The borrower has to go to the notary twice. The first time within ten days of the completion date, to review the mortgage with the notary and receive free advice.
The borrower will have to answer a series of questions to demonstrate that they understand the mortgage contract and they will sign a statement stating that all the mortgage documentation has been received and that its content has been explained to them.
The new mortgage law comes with a lot of benefits for customers, which is good news. If you are thinking about buying a Spanish property with a mortgage we would be pleased to introduce you to independent brokers who can find you a competitive mortgage to suit your needs. Please do not hesitate to contact us to discuss your Spanish property purchase and mortgage.