A new Spanish mortgage law comes into force on Monday 17 June 2019 and brings Spanish rules into line with EU consumer protection regulations.
It is expected to cause short delays to Gran Canaria mortgage applications and property purchases in July as banks, notaries, gestorias and estate agencies change their procedures to fit the new rules.
The main effects of the new Spanish mortgage law in Gran Canaria and across the Canary Islands are as follows…
Banks now pay most expenses associated with getting a mortgage
Property buyers still have to pay for the tasación, or official property valuation.
However, from now on the bank must pay for all other expenses associated with mortgage applications; : the Legal Acts Documents (AJD) tax, notary fees, registry expenses and gestoría costs. These costs add up to well over 1000 euros, more in the case of high value property.
Buyers still pay property purchase tax (ITP) which is currently 6.5% on second hand property in the Canary Islands.
Evictions due to mortgage default is now much more difficult
Spanish banks cannot foreclose on a mortgage until a client has missed a minimum of 12 repayments, or repayments that add up to more than 3% of the mortgage principal. In the second half of a mortgage this rises to 15 repayments and 7% of the principal.
The mortgage application process is now more transparent
The client now has a minimum of 10 days to analyze the pre-contractual information given by the bank before signing the mortgage papers. The notary must explain all the details in advance.
This mandatory 10-day period will make some purchase processes longer for buyers.
Clients can choose a notary & associated insurance products
Bank clients can choose a notary rather than having to use the one selected by their bank.
They can also shop around for associated products, such as home insurance, life insurance and pension plans.
There is still some debate about how this will work.
Floor clauses on mortgage interest rates abolished
Spanish banks can no longer set a minimum interest rate for mortgages. The minimum rate is now set at 0% to prevent the banks from having to pay you for having a mortgage if the Euribor drops below zero.
Clients can choose a valuation company or professional valuer
Banks can no longer insist that their mortgage clients use their approved valuation company (tasador). Individual valuers certified by the Bank of Spain can now also carry out mortgage valuations.
Commissions down but will mortgage rates rise?
There is concern that while these measures save money for people taking out a Spanish mortgage, the banks will recover their losses by increasing their interest rates they set when making a mortgage offer to clients.
Read my guide for complete info on getting a Gran Canaria mortgage in 2019.
