The keys to the new Mortgage Law

This month the new Mortgage Law came into force, a European regulation that comes to Spain to increase the protection of consumer rights, improve transparency and establish a more equitable distribution of costs between the customer and the financial institution.

The passage of the law will help unblock the mortgage market after several months of uncertainty. In fact, some banks have already begun to adapt to the new regulations, assuming all costs – including valuation – in order to attract new customers.

In the coming months, we will see how the mortgage supply will diversify and some banks will lower their exchange rates while others will raise them. The important thing is that you compare and find what best suits your needs.

And what is this law that everyone is talking about? In this article, we’ll tell you about the new law and simply discuss how it can help you.

As a customer, you’ll have more guarantees

This new law wants to correct some mistakes of the past and reduce the demands in this sector for issues such as soil clauses, which are eliminated from contracts, or the Reference Index of Mortgage Loans.

How does he do it?

• On the one hand, the Law obliges the client to go to the notary, who will do a questionnaire to make sure that he understands all the conditions of his loan. He will have to go to the notary twice and on one of these visits the bank will not be present.
• On the other hand, the regulations oblige entities to give you a draft of the mortgage contract at least ten days before signing, so that you can consult it with time and dedication.
• Both future mortgages and those who are already paying a mortgage can benefit for free from the service of a comparator where they can find all the mortgage offer.

You’ll save money

The law provides for a more equitable distribution of costs between the customer and the financial institution. The bank bears the mortgage costs: notary, agency, registration and documented legal acts. Whereas the client will assume the cost of the appraisal -unless the bank wants to pay it- and the expenses of constitution of the mortgage. On average, the savings for the client will be between 500 and 1,000 euros.

Banks may continue to charge an opening fee, which has a different cost depending on the entity. The new rule states that this fee is accrued only once and includes all costs of study, processing and granting the loan or other similar.

On the other hand, the law provides for a 50% reduction in early repayment fees for fixed-rate mortgages (2% for the first 10 years and 1.5% thereafter), while the customer must choose the repayment rate for three or five years when his mortgage is variable (fees of 0.25% or 0.15% respectively).

In addition, under the new law, if the client does not agree with the conditions he signed, he can change them without the entity charging him any commission for the novation of the loan.

Conditions for evictions softened

Constant evictions have been one of the social dramas of recent years in our country. The new law also aims to affect this fact and significantly soften the conditions for foreclosure.

Now the bank will not be able to act until the client accumulates 12 months of defaults or 3% of the loan in the first half of the contract. In the second half of the loan, the term for eviction is 15 months or 7% of the mortgage.

You cannot be forced to contract other products

The law prohibits bonding. They cannot force the client to take out insurance or another product as a condition for the mortgage to be granted. However, the entities can make reductions in their interest rates if the client takes out, for example, household insurance.

Subrogate mortgage will be free

Subrogate the mortgage means changing the mortgage from one bank to another. With the new regulation the client, with loans prior to the Law, will be able to subrogate without costs and freely his mortgage.

The new regulation facilitates this change since the subrogation commission that oscillated between 0.25% and 1% disappears, depending on the year in which the house was bought. To avoid a ‘war between entities to “steal” mortgages, the Law imposes costs for the bank that carries out this action.

Environmental projects are rewarded

The so-called green mortgages, those aimed at investment projects in energy efficiency, do not require the need to grant public deed and may be registered at any time during the term of the credit, without having to pay the Tax on Documented Legal Acts.

With all these changes, you will have more elements to compare and find the offer that best suits your needs.