In the sphere of buying and selling real estate there are even slight fluctuations. In 2019, changes affected the mortgage laws of the country. How did this affect the market and what is worth paying attention to those who are going to buy housing in Spain in the mortgage after the changes in mortgage laws entered into force in 2019? A year after the entry into force of the new law “Ley de Crédito Inmobiliario 5/2019” with the beginning of the new calendar year can not only analyze the innovations, but also see some results.
What happened before the 2019 changes?
Let’s start by taking a look at the past. Previously, according to Spanish law, to apply to Spanish banks with a request for a mortgage loan to buy a home could any foreigners, regardless of the country from which arrived wishing to get a sunny country own villa, apartment, townhouse, penthouse, bungalow or any other residence, regardless of its category of prestige. Neither guarantors nor bail was needed. It was only required to prove their own solvency by submitting bank statements and a number of other papers, work certificates, statements of accounts and deposits). Mortgage lending in Spain was available for 5 to 30 years at an annual rate of 2 to 3.2%. Early repayment was available, and could count on 60-80% coverage of the cost of housing credit.
What have brought in the process of mortgage lending in Spain changes in the law?
All of the above remains in force. Foreigners can still count on a mortgage at a rate of 2-3% or even more. This is a positive side. But there is also a nuance controversial, concerning a really new aspect of lending to foreigners. So, now, according to Article 20 of the new law, at any time a bank client can transfer the loan to the currency in which he receives income in his country of residence. “Multi-currency mortgage” is an innovation that has made the most noise, as the exchange rate is constantly changing. Previously, the list of currencies in which Spanish mortgages could be converted was clearly defined, now – unlimited. For foreigners who are not in the Eurozone, this innovation may be convenient, and for Spanish banks – not very much, because it is associated with a pricing strategy, the exchange rate and technical difficulties.
Spanish mortgages after 2019: a short summary of the main innovations
A lot of people who want to buy mallorca luxury property will be glad that now:
- Reduced commission for early repayment of mortgage loans – from 2019 it is 2% in the first 10 years and 1.5% – in subsequent years for mortgages with a fixed rate and up to 0.25%-0.15% – with a floating rate;
- The non-payment period, after which the bank can withdraw the housing, has been increased to 12 months and 3% of the total loan amount – this is designed to protect creditors who are experiencing temporary financial difficulties;
- It is now cheaper and easier to convert floating rate mortgages into fixed rate loans;
- Penalty on non-payment of contributions is now only assessed on the outstanding portion of the debt, and its maximum amount is now 3% plus interest rate;
- Customers no longer have to buy additional financial products such as life insurance or home insurance;
- Customers now only pay for the valuation of the property, with all other costs of arranging the mortgage being borne by the banks (including the registration of the mortgage contract in the Property Register and its execution).
However, the point of more thorough examination of the applicant is rather not the most positive. Now the information on previously issued mortgages will be available to the bank that requested it – about the type of loan, its terms, amount, date of the contract. The solvency of the client is checked more carefully, includes an analysis of credit history.