The Congress of Deputies has approved the new mortgage law (pending of approval by the Congress of Senators) on 11th December 2018. This new mortgage law will try to protect consumers in 3 aspects: avoiding evictions, lowering mortgage amortization and forcing banks to pay mortgage expenses. In addition, it points out that it is not obligatory to contract products linked to the mortgage (it is an option).
Changes introduced to the Mortgage Law
The new law has to match with the European Regulation 2014/17/EU and these are the most important modifications:
Mortgage expenses: The bank will pay all mortgage expenses, such as notary fees, registry fees, agent fees, Stamp Duty (AJD). However, it is expected that the bank will transfer these costs to the customer by means of raising interest rates. The valuation fees will be paid by the customer.
Customers’ protection: There will be more protection to the customers to avoid eviction. During the first half of the contract: there must be a non-payment of fees that reach 3% of the principal of the loan or 12 monthly payments. Thereafter, the mortgage can be enforced.
From the second half of the contract: there must be a non-payment of fees that reach 7% of the principal of the loan or 15 monthly payments.
Repayment of mortgage advantages: The new law wants to lower the costs of early repayment of the mortgage to equate Spanish legislation with the European directive. This measure has been approved retroactively for new mortgage repayments. What does this mean? That all those who make an early repayment on their mortgage from the entry into force of the law, may avail themselves of these new conditions. Those who already made an amortization in the past (with the previous law in force) will NOT be able to claim or recover the money.
Change to fix interest rate: It will be easier and cheaper to change the mortgage with variable interest to fix interest. The máximum bank comission to change the rate will be 0,25% during the first 3 years. After that will be free. The bank will keep the right to accept or not the changing of interest rate from variable to fix.
No surrogate commission: It will be possible to surrogate and renovate mortgage without bank commission. The bank will not charge a fee in these cases.
Maximum delay interest: The maximum delay interest fixed in the contract will be three times the official rate.
It is expected that the law enters in vigour in March 2019.