On December 11, the report on the Law regulating Real Estate Credit Contracts, better known as the “new Mortgage Law”, was submitted. From Lexer we analyse the content and the changes that are coming in the contracting of mortgage loans.

  • Who will assume the costs of incorporation? The buyer will assume the cost of the appraisal, which may also be of their choice, while the bank will bear the rest of the expenses: Tax of documented legal acts, notarial tariff, expenses of registration in the Property Register and management.
  • Can they force the buyer to contract other products to grant the loan? The new law prohibits the tied sale of loans except when the bank can prove that the joint sale is of clear benefit to the buyers. Home and life insurance and policies may be contracted with another entity without making the conditions of the loan more expensive.
  • How will it affect foreclosures? This point is a real change, as more guarantees are given to the buyer. Until now, the non-payment of 3 instalments was enough to become due in advance and to foreclose the mortgage. Now, the loan is temporarily divided into two halves, in the first half to foreclose the mortgage you will require the non-payment of an amount equivalent to 3% of the capital loaned or 12 instalments. For the second half, these requirements are increased to 7% or 15 instalments.
  • Does this affect foreclosures that are already in place? No, since the law does not have a retroactive scope. Many of these foreclosures are held up in court until the ECJ rules on the early termination clause, so these procedures will not be affected by the new law and will remain at the ECJ’s discretion. The law does foresee a temporary provision to formulate extraordinary objection in some cases, if they have not yet been made during the procedure, this event is limited in time to the taking of possession of the property.
  • In the event of non-payment, what interest on arrears will the buyer have? A new consumer protection is added according to which the interest for late payment is fixed at the interest on remuneration plus 3 points.
  • Can the floor clause be included in the mortgage loan contract? No, the new law prohibits applying a minimum interest limit to the instalment even if it is lowered. However, it is also not accepted that the interest rate can become negative.
  • Will it still be possible to take out loans in foreign currency? Yes, multi-currency loans remain valid, although banks must periodically inform the buyer of terms and conditions, as well as the breakdown of amounts paid and the right to conversion to an alternative currency.
  • Can the loan be subcontracted to another entity? Yes, subcontracting of the loan with another entity is still permitted, although now no subcontracting fee can be charged. This section does have retroactive effect and affects the loan contracts in force.
  • Are early termination fees modified? The customer will pay lower fees for early cancellation.  For fixed-rate mortgages, the repayment fee will be 2% during the first 10 years and 1.5% after that period. When they are at a variable rate, the commission will be 0.25% and 0.15% depending on the period.
  • What will be the protocol for signing a mortgage loan? Once the buyer has been advised on the loans available in the market according to his needs and after analysing his solvency, the bank must send him an approved form with the information on his loan. Before signing the loan at the notary’s office, the buyer must go to the notary’s office beforehand so that the notary can inform and advise them individually about the contents of the loan and its clauses, and have them recorded in the minutes. Without this requirement, the deed cannot be signed.