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New mortgage regulations in Spain – what do they mean for the borrower?

  1. The borrower can now choose which Bank of Spain regulated valuation company values the property they are buying. This is fair as the borrower is paying for the survey, but it does leave the banks open to false valuations. One bank have said they may instruct a second valuation to verify the one the client has provided. This would be paid for by the bank, but what would happen if the values conflict, is not clear.
  2. Other changes include lower set-up costs, lower early repayment penalties, control over any rise in Spanish mortgage regulationsinterest rates as the mortgage rate can never be increased by more than 3%, and a ban on obliging clients to take the bank’s other products, such as insurance, savings plans, pension plans, etc..
  3. Banks now also have to wait for up to 24 months of payment defaults before they can repossess a property. 
  4. One aspect is the introduction of a new cooling-off period. The borrower must sign the new FEIN mortgage offer document and then at least 10 days must pass before they can obtain the loan. 
  5. An inconvenience is that the borrower, 10 days before completing the purchase, must convince a notary that they understand the terms of the mortgage and the property purchase. Lawyers, under strict conditions, might be able to attend one or both of these meetings on behalf of their client, but that would appear to remove the aim of ensuring that the borrower/buyer knows what liabilities they are taking on.
  6. Another double edged benefit is if a borrower has earnings in any currency other than Euros, and that currency drops in value against the Euro by more than 20%, the borrower has a legal right to convert from a Euro mortgage to one in the currency of their earnings. This increases the risk for the bank, and some won’t offer mortgages to those not earning in Euros.

What are the benefits?

The benefits are that borrowers now have far greater protection, control and lower set-up costs. The downside is that banks may increase interest rates and commissions to compensate for their increased costs and higher risk.

Where lenders require an internationally accepted, RICS Red Book current market valuation, Survey Spain will be pleased to provide it. An ECO valuation, by a Spanish tasador, under the instructions of the Bank of Spain, will also be required to register the loan. 

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