Due to the importance of the changes enacted last June on taking out a mortgage in Spain, we will briefly collate in bullet points all that’s new. The majority of these changes are pro-consumer, greatly benefitting borrowers in Spain.
All changes effective as of Monday 17th June 2019.
1. Floor clauses (collar clauses) will be completely removed in all mortgage loans granted as of this point.
2. Repossession procedures will now only take place when a borrower falls in arrears by 12 quotas or 3% of the capital. In other words, a lender must now wait for at least 12 months in arrears before repossessing. This used to be only 3 months in arrears before repossession procedures could be instigated by a lender.
3. A borrower must now visit a Notary twice, the first time at least 10 days ahead of signing the Mortgage deed. The borrower will have the opportunity to ask any relevant questions about the terms of the mortgage to the Notary witnessing the signing of the Mortgage deed. The Notary may test the borrower’s knowledge of their loan terms. The second time will be with the lender to sign the Mortgage deed and legally formalise the loan.
4. The borrower will be handed over a copy of the mortgage deed at least 10 days ahead of signing it at a Notary.
5. On taking out a mortgage loan in Spain…
…the borrower pays for:
- The property appraisal (‘tasación‘ in Spanish), which is on average between 400 and 700 euros. The borrower is free to choose any valuer they like.
…the lender pays for:
- Stamp Duty (AJD) on the full mortgage loan amount.
- Gestoría management fees.
- Notary fees.
- Land Registry fees.
6. Lenders may no longer tack on a mortgage any non-requested linked financial services and products e.g. home insurance, life cover, pension plans, credit cards etc.
7. Early mortgage redemption penalties are now capped, being significantly reduced.