Mortgage in Spain 2019 regulations: What do they mean for you?
Mortgage Regulations in Spain in 2019
New mortgage regulations in Spain were put in place on June 16th, 2019. There is an ongoing EU directive, and the recent laws are part of it. The EU directive is aimed at availing mortgages in Spain and every EU lending in all member states into line to enhance the behaviour and transparency of mortgage providers.
In the recent past, mortgage lenders have been placed under scrutiny over unfathomable behaviours such as using mortgage base rates. This is the rate below which they must never fall. They have also been carefully assessed for the lack of lucid explanations of the products, obligation to secure extra services like restrictions and insurances, and insufficient flexibility within the market.
We have tried to cover every aspect of the new regulations to help you understand what they are, and what they might mean to you.
What The New Regulations in Spain Mean for You
As a purchaser, there are some advantages that you stand to gain from these regulations. For instance, now you have the chance to choose which of the valuation companies have high value for the property you intend to buy. If the organisation is accepted by the bank of Spain, then their valuation should be easily acceptable. However, some banks have reported that they will instruct for a second valuation to have the first one verified.
Usually, due to poor valuation, a sale might end up falling through. Therefore, these regulations are a huge breakthrough. The purchasers now don’t have to simply rely on the bank’s panel for the valuation companies.
The other advantage you need to know about is the lower early redemption penalties, lower set-up costs, and absolute control over the increase in the rates. There is also a ban on forcing the purchasers to contract the add-on products like pension plans and saving plans. The other good thing about these changes is that banks will have to wait up to 24 months payment default before they can repossess property from you.
The only thing about the new regulation that can be seen as a drawback is that it introduces a cooling-off period, which just like the 15-day period that is already there in Catalunya. The new law applies nationally and will require that you officially acknowledge the FEIN mortgage papers. After that, you have to wait at least ten days before getting through with the process. As they implement this process, the buyers are compelled to visit the notary office ten days before the purchase is made. You also need to take an exam to demonstrate your understanding of the terms and conditions of the mortgage and the property purchase. Without doing these things, you might not get the mortgage that you are trying to apply for.
How the New Laws Have Affected the Mortgage Market
According to some sources, the complexity of acquiring a mortgage in Spain might lock out some potential buyers. This is because they might see it as too much struggle to get the property that they are willing to buy. Note that if the process is lengthy, it makes the overall cost of acquiring a mortgage to be very high. However, while the complicated process is eluded to discourage some buyers, there was a 15% increase in the number of buyers who showed interest in acquiring a mortgage. Therefore, it might be a little too early to make such conclusions.
What is clear with the new regulations is that buyers now have enough protection as they enjoy the more favourable costs. However, the disadvantage of the regulations is that it is more complicated to get a mortgage and the banks will feel a pinch. It is believed that the financial institutions might end up increasing their interest rates to cover for the reduced overall profits on mortgages.
It is clear that the new mortgage law is focused on benefiting the buyers and not the banks. Therefore, the banks might modify their terms so that they cover for the losses they stand to incur due to the new mortgage regulations.