Spanish Mortgage New Legislation for 2013


Key changes to mortgage legislation in Spain have been announced and will be implemented over the next few months.

The key changes which affect the resident market include.

  • No loan will ever exceed 80% of the appraised value of the property even in the case where other collateral is being offered as security
  • The maximum term by law will not exceed 30 years
  • Buyers and borrowers will have the right to appoint for the valuation their own independent valuer as long as that valuation company are accredited. Banks will be forced to accept a private valuation and will no longer be able to insist they do their own.
  • The default interest rates which borrowers pay in the event of a default situation will be a maximum of 12% by law. Currently there is no law limiting this and default rates are often as high as 20% to 25%.
  • More power will be handed to Notaries to allow them to prevent abusive terms being offered and signed for. At present a Notary only has the obligation to ensure the borrower understands what they are signing, going forward they will have the ability to stop the signing of the mortgage deed if they believe the terms are unfair.
  • All clients will be required to sign to state they have been properly warned of all the risks associated with the loan they are taking.
  • In the event of a default borrowers will in the future have the right to force the sale of their property to anyone willing to buy it at a price higher than the future designated auction price. This means to all intents and purposes the owner can instigate their own foreclosure process rather than wait for the judicial process to start saving on costs, and default interest rates. Whilst selling without the Banks consent does not dissolve the borrower from owing outstanding monies it does mean the final bill could be much less.

The new measures are to be put in place to facilitate careful lending ensuring those who can afford a Spanish loan have access to credit without the overstretching seen in the past.

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