On June 16, the new mortgage law came into force after three years of paperwork and negotiations.
A series of changes are introduced in the procedures for all those who want to acquire a home that affects both consumers, banks and notaries.
The three main novelties of this new norm are that the amortization commissions are limited, it is specified who must pay the expenses related to the constitution of the credit and the conditions for a bank to initiate the procedures of an eviction are hardened.
As Nuria Rando Rando, lawyer in the area of Banking Law of Gaona Abogados BMyV, says, "the new law will be applicable to mortgage loan contracts whose borrower, guarantor or guarantor is an individual and the mortgage falls on real estate for residential use. Also when the purpose of the loan is to acquire or retain property rights over land or buildings built or to be built as long as the borrower, guarantor or guarantor is a consumer. "
Protect consumers against the signing of mortgage loans. This new law wants to ensure that clients understand perfectly the documents they sign and there are no abusive clauses.
The new law establishes more stringent examinations and requirements to guarantee payment by buyers.
The bank must analyze:
- employment situation
- present and foreseeable income during the life of the loan
- assets owned
- fixed expenses
- the commitments already made
Another novelty is that the mortgage is not granted based only on the value of the appraisal.
Once the study has been done and the client's credit history has been consulted in the Risk Information Center of the Bank of Spain, the bank will be able to approve the mortgage, only if this evaluation indicates that the buyer can pay. If it is not approved, the bank must inform the client in writing explaining the reasons for the denial.
Steps to follow
If the mortgage is approved, the bank has 10 days to present the following information:
- European Standardized Information Card or FEIN,
where information about the client and the characteristics of the loan (interest rate, amount, expenses, commissions, fees ...) appears. This document is binding for the bank.
- Standardized Warnings Card or FiAE
, where the consumer is informed of the existence of clauses or reference indices used to set the applicable interest rate.
- Document where all the installments to be paid appear in case the loan interest is variable
- The client must have specified all the expenses associated with the signature and if the bank requires or not a home insurance, if so, the conditions of the same must be in writing.
- The client must be informed that he will receive, on a mandatory basis, advice from the notary. This point is required by the new law. The bank must send a copy of all this documentation to the notary chosen to process the process.
Role of the notary
The notary has a first visit before signing the contract to clarify any doubts that may arise.
In this first appointment, free of charge, the client will be informed of all the clauses of the loan exhaustively and must complete a test on all the documentation delivered.
This visit must be made at the latest one day before the public deed authorization. If during said visit, the notary considers that everything is correct, he issues a report, without cost, a date is arranged for a second visit.
The new law requires a second visit, in which the contract is signed, where the deed of mortgage loan is granted.
With these two visits it is intended:
- That the client knows the notary before signing (something that did not happen before)
- Give more confidence and legal security
- Promote transparency and understanding of contracts and their clauses
- Offer a balance between parts
According to the new law, the client is obliged to contract a home policy, but not with the entity that gives him the mortgage.
There is an exception, which is that the bank can link the loan grant to the client and its guarantor to contract certain financial products, however, with accurate information about them.
It also allows the bank to offer discounts on the interest rate for products contracted voluntarily, such as a deposit, a card or a pension plan.
Expenses and commissions
The client only pays the appraisal expenses.
The agency, the notarial expenses, the inscription in the registry of the property and the Tax of Patrimonial Transmissions and Documented Juridical Acts (IAJD), are assumed by the bank.
The law says that only "expenses or commissions for services related to loans that have been requested in firm or expressly accepted by a borrower and always respond to services actually provided or expenses that can be credited" can be passed.
The right of the consumer to reimburse, in general, all or part of the loans without paying a commission is also established. The law establishes the right of the bank to be compensated (the financial loss) when the reimbursement occurs in the first years of the contract, but with certain limits.
If the client decides to amortize with a variable rate mortgage, the bank may charge a maximum commission of 0.15% of the capital repaid early in the first five years of the contract or 0.25% in the first three years. The law says that only one of the two commissions can be applied.
If the mortgage is fixed interest, during the first ten years of the contract, the commission may not exceed 2% of the capital repaid in advance. After those ten years, the limit will be 1.5%.
Regarding the opening commission, if it is agreed between both parties that exists, it must be paid at one time and must include the costs of studying, processing and granting the loan.
The law prohibits them in variable interest mortgages, but specifies that the interest can not be negative, so the bank will never pay clients for lending them money. If the Euribor is negative, as now, the interest may be equal to zero, but nothing more.
Procedures for eviction
The new law toughens the conditions for the financial institution to request an early expiration. It can only be done if in the first half of the loan there is an unpaid of 12 installments or if the amount that has been left to pay is equivalent to 3% of the loaned capital. In the second half of the loan, the bank may call for foreclosure when there is a default of 15 installments or 7% of the borrowed capital.