How does the new Real Estate Credit Contract Law affect you?
SAVINGS AND INVESTMENT I September 10, 2020
On 16 June 2019, the new Real Estate Credit Contract Law came into force. Law 5/2019 of 15 March, regulating real estate credit contracts, introduces Directive 2014/17/EU into Spanish law, regulating the customer protection regime and establishing the rules of conduct in mortgage loan contracts
This new law aims to reinforce legal certainty, increase consumer protection and the transparency and understanding of contracts and establish a more balanced distribution of costs between customers and financial institutions.
Thus, before providing a mortgage, a prior assessment of the customer by the banks is required in order to prove that the customer will be able to meet the obligations arising from the loan. Among others, their employment situation, current income, expected income over the life of the loan, assets owned, savings, fixed costs and commitments already made will all be studied.
In addition, the new Real Estate Credit Contract Law significantly increases the information that must be given to those who are going to take out a mortgage. Accordingly, the bank must provide the customer with the following documents at least ten calendar days before the time the agreement is to be signed:
The new regulations also provide for a mandatory prior visit to the notary. Thus, the future mortgage loan recipients will have to go to the notary at least one day before the signing of the loan to receive free advice and to answer a questionnaire about the conditions of their loan. The notary may not authorise the mortgage deed if the customer does not pass this test and it is certified that the future borrower has received all the documentation. Notaries and registrars also may not notarise or register abusive terms or conditions.
In all cases, the bank must disclose the differences between the combined offer and the price of the products separately.
Thus, in variable-rate mortgage loans the maximum fee for early repayment will be:
In the case of a fixed-rate mortgage loan, the maximum commission that the bank can charge for this concept is:
The new law will only apply to mortgage loans signed since its entry into force. However, some specific articles do apply retroactively.
Specifically, all mortgage holders will be able to benefit from the lower cost of changing from an adjustable to a fixed-rate mortgage loan, both via novation or through subrogation of the creditor and transfer of the mortgage to another bank. In both cases, the maximum fee that can be charged is 0.15%, but only during the first three years of the mortgage loan contract; after this period, the bank cannot ask for any payment.
Also applicable to mortgage loans prior to the new Mortgage Law is the article that establishes when a mortgage can be foreclosed upon in the case of non-payment. To begin the foreclosure process, the bank will have to wait until the amount of the overdue and unpaid mortgage payments is equal to:
In addition, those who have signed a mortgage loan before 16 June will also be able to change it to another bank freely. Until now, when you wanted to subrogate the mortgage, if your bank made you a better or equal counter-offer, you had to accept it. Now this is no longer mandatory.
Now that you know all the details of the new regulations, if you are thinking of buying a house, take a look at Banco Santander's mortgage products.
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