Spain Explained

The Mortgage Act: Why a Spanish mortgage calculator may be misleading

The Spanish government has introduced some new legislation around mortgages – which means your Spanish mortgage calculator may no longer be correct. However, the good news is that it does mean that applying for a Spanish mortgage is clearer and significantly cheaper than before. The new Mortgage Act, or the Law 5/2019 of 15th of March, has changed how you apply for a mortgage in Spain. In this article, Ábaco Advisers outlines the stages of the new mortgage application process and what you might expect. With this information, you can ensure your Spanish mortgage calculator is accurate.

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The basics of applying for a Spanish mortgage

Although the process is slightly different, you needn’t be intimidated if you’re thinking about taking out a mortgage in Spain. Applying for a Spanish mortgage follows a similar pattern to most other European countries.

Primarily, the lender will want to make sure that their investment is sound. This means you will have to comply with various terms and conditions. Firstly, the mortgage provider will need to check that you have sufficient, regular income to make the monthly payments. Second, they’ll also want to make sure that you have an acceptable deposit available; in Spain, this is approximately 20% to 30% of the property’s value if you are a resident and 30% to 40% if you are a non-resident. Don’t forget, you will also need to cover purchase tax and all the purchase fees.

Once the lender assesses your details, then they should present you with a firm offer. The lender will then ask you to sign an acceptance of mortgage conditions in their branch. These conditions are then the ones which will comprise the mortgage deed which will be signed at the Notary at the same time as the purchase deed.

How new legislation has changed the process

The Mortgage Act in Spain is designed to protect the interests of the applicant. One of the most immediate benefits of is that it requires the lender to pay most of the fees associated with the mortgage. These include the stamp duty, gestoría, notary fees, and Land Registry fees.

The mortgage provider must now follow a European template that makes it easier to understand an offer and compare banks. The bank must also provide additional documents that detail not only the conditions on offer, but also provide generic advice about how mortgages work and the requirement to seek professional guidance other than the bank’s and the costs involved.

The biggest change brought by the new legislation is the requirement for the applicant to sign documents that demonstrate that they have been provided with the necessary advice by the bank. These documents are then uploaded to an online platform which records the date. The Notary will then download and review the documents and prepare the mortgage deed on that basis.

After a minimum interval of 10 days, the mortgage deed can be signed. Within that time, and at least one day before the signing, the applicant must visit the Notary to sign the ‘Acta’ which is a pre-mortgage deed. The client must sign these documents without a representative from the bank in attendance. The client will be asked if they have received all the information they need and if they are happy with the conditions.

The Acta includes a questionnaire that the mortgage applicant must complete in front of the Notary to prove that they properly understand the conditions of the mortgage. The day after this, they can then return to the Notary for the final signing of the mortgage deed, this time in the presence of the bank.

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A Spanish mortgage calculator and the new Mortgage Act

Not only has this new legislation made applying for a mortgage cheaper, it has also increased the transparency of the process. Although it has changed the costs that may have previously appeared on a Spanish mortgage calculator, it makes sure that applicants are clear about the debt they are taking on and that there are no last minute changes imposed by the bank. The Spanish government introduced these new rules for mortgages signed after the 16th June 2019. This system should be safer and clearer for all those buying a property with a mortgage in Spain.

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