Law 5/2019 enacted on March 15th was published
in the B.O.E. on March 16th regulating mortgage loans. It will
serve to give greater protection to customers from banks and
financial institutions.
There is a transition period of three months to give banks enough
time to adapt to this law. Therefore, it will not enter into force
until June 16, 2019.
The most relevant features of this law are:
1. It applies to those mortgages loans requested by individuals whose purpose is to acquire real estate for residential use or the acquisition or conservation of land or buildings which have been built or will be built.
2. The bank or financial institution will be obliged to provide more information to the customer who is interested in a mortgage loan and wants to purchase a home. The bank must provide the customer with a binding offer regarding all credit conditions. The customer has a period of 10 days to review it and give his or her consent.
3. The customer must receive in-depth, free advice from the bank and the notary must check if this procedure has been complied with.
4. The bank pays the agency, the notarial fees, registration at the Property Registry and the Tax on Certified Legal Documents.
5. The bank may seize a property during the first half of the mortgage if the default is at least 12 outstanding monthly instalments or an amount exceeding 3% of the loaned capital is owed. During the second half of the mortgage, at least 15 instalments or more than 7% of the loaned capital must be owed.
6. The banks cannot force customers to buy attached financial products when granting the mortgage. In other words, the law establishes a ban on tied sales. However, there are two exceptions. First, the banks can insist that a house or life insurance is taken out by the customer. Second, the bank can attach products to the mortgage if the Bank of Spain affirms that they are beneficial to the customer.
7. It is expressly forbidden for the mortgage loan to include the clause popularly known as a floor clause.
The law also applies to all those houses that are already up for auction but that have not been awarded to a third party. It affords the opportunity to the former owner, even though the house is involved in a legal proceeding, to make a claim on the clauses considered abusive if he or she was not able to do so when owning the house.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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