The Spanish Congress of Deputies has approved the new mortgage law. After having been ratified by the Senate, the new mortgage law has been published in the Official State Gazette (BOE) in March and will come into force on 16/06/2019.
The most important changes are the following:
A better protection for the customer:
The customer will receive his mortgage documentation at least ten days before signing in order to have enough time to read the contract and resolve any doubts with the entity that may arise. This documentation must include:
- The draft of the mortgage contract,
- a simulation of the periodic instalments,
- an overview showing the costs associated to the deeds of the mortgage, and
- two standardized forms: the FEIN (a Standard European Consumer Credit Information form) and the FIAE (a standardized warning form).
This will make it easier for the customer to compare the offers of different entities.
The bank must check the customer’s credit history at the Bank of Spain, under assumption of the costs. If the loan is granted, the bank can transfer the customer’s data to private credit information platforms.
Appointment with a notary before signing the mortgage deed:
The customer and his guarantor(s) must go to a notary of their choice within ten days before signing the deeds, at minimum one day before. The bank must be given the name of the selected notary, so that they can send all the mortgage documentation to him. The notary will check whether the bank has sent all mandatory documents and whether he received it in time. He will give free advice to the mortgagee, answer all his questions and will inform him about his rights and obligations. After the conversation the notary will attest in a notarial deed the content of this conversation. The customer will have to make a test and will sign a declaration that he has everything understood. This first visit to the notary is free for the customer.
The customer will only pay the cost of the appraisal (which must be done by an Authorized Appraisal company) and his copy of the deeds. The bank will have to take over the rest of the expenses (management, AJD tax, notary and registration fees and its copy of the deeds).
Goodbye to the floor clauses:
The approved law prohibits the floor clauses (cláusulas suelo). During the term of the contract the interest rate cannot be modified to the detriment of the borrower.
In future, the banks will not be able to impose their linked products, like home insurance, life insurance, cards, etc. However, they still can offer bonuses for the products that are contracted together with the mortgage. If a life insurance is requested by the bank, now the customer may present alternative policies to the entity without the interest being increased.
Opening commissions must include all costs for processing, study or concession and will be accrued only once.
Subrogation and novation:
The customer can change banks and the conditions of his mortgage, whenever he wants and without additional cost. Changing from a mortgage with variable interests to a mortgage with fix interests may never cost more than a 0,15 % commission.
A holder of a loan granted in other currencies can now convert the currency to that in which he receives his income or to the currency of his country, whenever he wants.
Greater protection in case of embargo:
The law will also more protect the mortgagee in the event of an embargo. Mortgages can be foreclosed in the first half of the contract period only after a non-payment of 12 mortgage rates or a non-paid amount of 3 % of the initial mortgage amount. In the second half of the term they can only be executed after a non-payment of 15 months or a non-paid 7 % of the mortgage amount.
Finally, the new law reduces the commissions for fixed-rate mortgages (2% during the first 10 years and 1,5% afterwards). When the customer has a mortgage with a variable interest, he must choose the type of amortization to three years or to five years (with a commission of 0,25 % or 0,15 % respectively).
The new law will not apply to mortgage contracts which have been signed before its coming into force. However, two articles will be retroactive: The one that makes cheaper the change from the variable rate to the fixed rate and the one that establishes when the early termination clause can be applied. In addition, in the case of early expiry, customers may retain the clause of the original contract, if they consider it more convenient.
If you want to take out a mortgage, it is always advisable to contact an expert in banking law speaking your language to be best informed on this very important topic.