Understanding the New Credit Finance Legislation Regarding Spanish Mortgages

Understanding the New Credit Finance Legislation Regarding Spanish Mortgages

After years of waiting and conjecture, Spain’s new mortgage regulations are now operative. For Spanish homebuyers, these legislative modifications are welcome as they provide better consumer protection, simplify and lower the cost of early mortgage repayment, and ultimately control multi-currency mortgages. Good news for British people wishing to get a mortgage in Spain!

Spain has amended its credit financing laws, and they are rather comprehensive. We’ve deconstructed this to provide a high-level synopsis of the document’s five most crucial elements and how they could impact you.

In light of this, the following information will help you better comprehend the new credit financing laws:

Paying Mortgage-Related Expenses

The impact of the new law on the expenses of getting a mortgage and who should pay them is one of the most prominent and well-publicized developments. The mortgage tax will be distributed significantly differently as a result of the new law.

The “gestoria,” the notary, the register, and the AJD (often referred to as the mortgage tax) will now be paid by the bank. We go into further depth about the roles of the notary, registrar, and AJD in our guide to purchasing in Spain.

The opening/arrangement fee and the cost of the property appraisal are the only expenses that the customer will be liable for.

This is really excellent news for anyone wishing to purchase a Spanish house, since all of these costs were the responsibility of the prospective Spanish homeowner before to the introduction of the new credit financing regulations.

Paying Off Your Mortgage Early

This next modification is likewise excellent news if you are one of the lucky ones who can pay off your mortgage early. These days, you may only be assessed a fee for paying off your mortgage early if doing so will result in a loss for your bank.

Additionally, your bank will no longer be able to postpone your early repayment choice indefinitely. The maximum amount of time a bank can need from you before terminating your mortgage arrangement is a done deal.

To put it another way, there are no financial consequences if you decide to pay off your mortgage early and you have the funds to do so.

Making It More Difficult to Repose

The guidelines that permit a bank to take back ownership of a home will be far more stringent under the new law. In actuality, the bank cannot even start the repossession procedure until the following conditions are satisfied:
You must have missed payments totaling 3% of the bank-granted capital if you are in the first half of your mortgage term, or 12 missed mortgage payments.
You must have missed 15 missed mortgage payments, or 7% of the capital that the bank gave, if you are in the second part of your mortgage term.

Enhanced Safety for Consumers

It’s critical to know your rights as a consumer, especially when making a big financial investment like buying a house. This is recognized by the new credit finance laws; in fact, the primary motivation for the legislation’s introduction was to safeguard consumers.

This document’s goals are to inform customers as much as possible and facilitate like-for-like comparison shopping between lenders. The FEIN document is legally binding for ten days after it is issued.

A FEIN document, also known as a European Standardized Information Sheet (Ficha Europea de Informacion Normalizada), must now be sent by the bank to prospective mortgage customers. The purpose of this paper is to provide borrowers with a summary of the terms and conditions of the available mortgage credit.

In addition, the bank is now required by law to give the borrower an FAE (Ficha de Advertencias Estandarizadas), which explains the terms and conditions of the loan in clear English.

In addition, free financial counseling will be provided to prospective mortgage owners, and before the notary can lawfully approve the mortgage and authorize the deeds, the notary must pass a financial aptitude exam. Making ensuring lenders are accountable and borrowers are aware of the commitment required to obtain a mortgage is the goal here.

Mortgages with Multiple Currencies Will Be Regulated

Property purchasers from the UK who are Spanish are quite happy about this shift. Mortgage clients with multiple currencies will now be able to change their currency terms to euros at any time. In order for you to make an educated decision, the bank is also required by law to tell you if the value of your debt is larger in euros or your other currency, which is most likely GBP.

In the event that there is a 20% fluctuation in the exchange rate, the FEIN document mentioned above is required to provide an illustration of how the mortgage payback expenses may rise. This indicates how crucial this market is to the Spanish real estate sector and has the potential to save foreign clients a substantial amount of money.