Spain’s new mortgage law, which came into force on 16 June 2019, aims to bring greater legal protection and
transparency to the sector, and introduces important changes that directly affect credit institutions and
Here we explain the most significant aspects of the new legislation.
Undeniably, the most talked-about aspect of the new mortgage law is the redistribution of
the costs of processing mortgage loans. Up until now, the consumer had to bear the costs of taking out a
mortgage; however, the new law requires that most of these expenses be paid by the lender.
Specifically, the lender is required to pay the processing agency, notary and land registry
fees in addition to stamp Duty.
On the other hand, the consumer is responsible for paying for the property appraisal and copies of notarial
documents when they request them.
Linked financial products
¿What is the situation now with life covers, home insurance, pension plans and credit
cards, etc., that banks used to tack on to the mortgage? Under the new mortgage law, the sale of so-called
‘linked financial products’ are generally prohibited. Approval of the loan cannot be conditional upon the
purchase of these products, a practice that Hipotecas.com never engaged in, even prior to the new law.
There have also been major changes with respect to the previous law where commissions are
Although financial institutions may establish arrangement fees, the new law provides that this can only be applied
once, and must include the loan assessment, processing and provision fees, provided these services were actually
In addition, commissions for the early repayment of mortgages, in part or in full, have now been restricted:
Two situations have been provided for in the case of variable-rate mortgages:
Repayment within the first three years: a commission may be charged that cannot exceed the amount of the financial
loss to the lender, and with a maximum limit of 0.25% of the capital repaid early.
Repayment within the first five years: the same formula applies but the maximum rate that can be applied is reduced
For fixed-rate mortgages, the amount is as follows:
During the first 10 years, or from the date the fixed rate applies, the commission cannot exceed the amount of the
financial loss to the lender, with a maximum limit of 2%.
After the first 10 years to the end of the mortgage term, the conditions outlined in the previous point apply, but
the maximum rate that can be applied is 1.5%.
For changes from variable to fixed rate, either due to the renegotiation of the interest rate by the mortgage holder
or the subrogation of the creditor’s rights to a third party, the commission cannot exceed the amount of the
financial loss to the lender, with a maximum limit of 0.15% of the capital repaid early during the first three years
of the loan agreement. After the first three years, the lender is not entitled to claim compensation or to apply any
commission whatsoever in the event of a renegotiation of the interest rate or the subrogation of the creditor when
it was agreed to apply a fixed rate.
¿How is the financial loss to the lender calculated? It’s a question of determining whether the current
outstanding capital will be greater than the sum of the instalments the financial institution will receive in the
future if the renegotiation of the interest rate or subrogation does not take place. Article 8 of the Law on Real
Estate Loan Agreements provides that this will be calculated in proportion to the capital repaid and will be the
difference between the capital outstanding at the time of the early repayment and the present market value of the
loan. Therefore, if the present value of the instalments is higher than the outstanding capital, this will be the
loss to the financial institution.
Financial loss = Outstanding capital – Present value of future instalments.
Another important feature of the new law is the tightening of the conditions for initiating
foreclosure proceedings by the financial institution in the event of non-payment.
¿What requirements does the new law lay down? In the first half of the mortgage term, the borrower must be 12
months, or the equivalent of 3% of the principal, in arrears before foreclosure proceedings can be initiated.
However, if the default occurs in the second half of the mortgage term, the borrower must be 15 months, or the
equivalent of 7% of the principal, in arrears.
And, as an additional safeguard, the lender must have demanded payment of the debt and given the borrower at least
one month to pay it.
Consumer education and information
In addition, to ensure the transparency and legal certainty of the market, the new law
reinforces communication between the consumer and the financial institution and gives the notary public a more
¿What are the bank’s obligations?
The former FIPER document, to use the Spanish acronym, has been replaced with two documents —
the European Standardised Information Sheet (ESIS) and the Standardised Warning Sheet (FIAE according to the Spanish
acronym), which set out the loan terms in more detail. The financial institution must provide these to the
consumer during the pre-contractual stage and at least 10 days ahead of signing the mortgage deed at a
The bank will also have to upload the loan terms offered to the consumer to a digital platform so that the notary
can access them to explain the terms and their implications to the consumer without the need for a representative of
the financial institution to be present.
In addition, banking professionals will have to pass certain tests to demonstrate their ability to advise consumers
on mortgage products.
New steps have also been added to the process of taking out a mortgage for the borrower. The borrower must now visit
a notary twice: the first time, 10 days ahead of signing the mortgage deed, to certify before the notary that they
understand the content of the agreement. If this requirement is satisfied, the notarial certificate is drawn up and
the borrower signs the deeds of sale and mortgage during their second visit.
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