Law 5/2019 of 15 March, governing property loan contracts, and establishing rules to protect individuals who are debtors, co-debtors or guarantors, comes into force today, 17 June 2019. Therefore, here at Gestimed, we have adapted our processes to the new regulation as it pertains to the distribution of expenses between the lending entity and the borrower, keeping records of the mortgage process, and sending documentation electronically. It should be noted that according to the instruction of 14th June 2019 of the DGRN, it is permitted until 31st July 2019 to sign operations without making use of the IT platforms foreseen in Law 5/2019, using other alternative means, such as the delivery of paper documentation, sending the documentation by mail or even by computer resources that meet the appropriate security measures.
Below is a summary of the main changes:
10 Changes to the Mortgage Act
The bank should provide the client with the mortgage documentation at least ten days before it is to be signed, and the interested party should visit the notary at least one day before signing the mortgage to answer any questions they might have. The notary should create a record of this event.
The maturity of the contract will be accelerated if the borrower is in arrears, provided the overdue instalments amount to at least:
A) 3% of the total loaned capital, or 12 unpaid monthly instalments, if the failure to repay the loan occurs within the first half of the loan period.
B) 7% of the total loaned capital, or 15 unpaid monthly instalments, if the failure to repay the loan occurs within the second half of the loan period.
The interest on arrears is limited to 3 points above ordinary interest.
The bank will cover the management, notary, Stamp Duty Tax, and record keeping costs. The valuation expenses will be covered by the client.
Switching to a fixed-rate mortgage from a variable-rate mortgage is made easier by reducing fees.
Early repayment charges are lowered.
Land clauses and all other clauses which the courts have classed as unfair are eliminated. In addition, remunerative interest cannot be negative.
Products which do not meet the criteria of the Bank of Spain cannot be linked to the mortgage.
The bank may continue to charge an opening fee, but it will be payable only once and will cover all costs that should be covered by the client.
The bank may not charge a fee for renewing the loan and the client may freely subrogate their mortgage at no cost.