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New mortgage law: what is it and how does it affect you?

Posted by Michel B. on 02/08/2019

The new mortgage law, this is called the regulation regulating real estate credit contracts, that is, the Real Estate Credit Contract Law.

In this article we will explain how this law works that went into effect last Sunday, June 16, by changing the rules of the game for the benefit of the client by improving the conditions and rules of management, contracting and the application process for Bank loans.

Moreover, it is estimated that this new law may save beneficiaries up to 1,000 euros in expenses. Some of them are the reduction in commissions that banks assume. In addition, credit applicants for other products that banks usually associate with the signing of such a contract are released.

But what exactly is the new mortgage law? How does it work?

The first thing is to know that the legal regulations have been in operation since mid-June, specifically since Sunday 16.

The inclusion of this law is due to a common regulation in Europe since since 2016 all countries belonging to the European Community must share common guidelines.

The aim of these developments is to provide more security and transparency for all parties, from customers to banks, since paperwork and bureaucracy are reduced by removing the abusive clauses exercised by banking entities when contracting with them a certain service.

News of the law

Without going into technical details of how it works and everything that this regulation brings we are going to keep its operation and a series of novelties that we will pay attention to and that affect the majority of users.

These are the following:

We should know that it does not affect all mortgages. The key to understanding this section is that the law does not apply to previous contracts as indicated by the first transitory provision. But that does not mean that it does affect those that are signed as of now.

Another novelty is that the client is obliged, yes or yes, to go to the notary with a minimum time of 10 days to calmly see all the documentation sent by the bank at the time of requesting the loan.

The notary takes center stage

In this case, the notary will help the client to solve all the doubts he has about the contract and its completion. This makes the role of notaries, if it was already important in itself, increase.

Out commissions

On the other hand, the law sets a limit for depreciation fees, regardless of whether they are total or partial. This is of the utmost importance since the new ceilings are set according to the type of mortgage, it is not the same as variable that sets. In addition, it is not the same to make a cancellation of the contract signed with the bank at the beginning of the mortgage than at the end of it.

Now changing mortgages is cheaper

In summary, if you are not satisfied with your mortgage and want to modify it so that it goes from fixed to variable or from multi-currency to euros, the delay interest cap changes since it is prohibited that the concession is subject to the contracting of other products as insurance.

In addition, the costs of formalization and deed of the new mortgage are shared between the bank and the client so the final price of the mortgage is reduced.

Information for a lifetime

Information is power. Hence, with the signing of a new contract, banks are obliged to keep their customers informed of all conditions and services throughout the life of the loan and the process of executing it.

And it is that thanks to the new mortgage law, banks must provide information on the type of evolution of interest rates, for example.

Likewise, before signing each contract, the banks must deliver to each client a common document between all the entities so that they can compare the services, the conditions of the contract as well as total information 10 days before the signature. This is in line with the previous section of the notary since you can inform us of some of the services in case of doubt.

The eviction process increases

The eviction process is increased since the bank can proceed to it only if there are twelve unpaid installments or 15 installments or 7 percent in the second half of the mortgage contract. There may also be the case of non-payment only 3 percent of the total capital in the first half of its life.

Notaries will have all the information

This goes in reference to the section of the notary takes center stage. This is because the banks must provide the information to the notaries by including all the information in a digital platform where the notaries can consult all the bank loan information.

More trained staff

Banks must examine their staff to comply with the conditions of the new law that requires more training to them.

Out insurance and cards

You are no longer obliged to hire any kind of service or life, home or any product that banks associated with these products. Of course, the bank can ask the mortgaged for some type of policy to ensure that it meets the conditions of the loan. You can also require another to cover certain damage to the property.

In addition to the common information sheets, banks must have a fee calculation sheet.

If you do not pay, interest is limited to a maximum of 3 percent each year of late interest for new contracts and 2 percent for old mortgages.

On the other hand, if you amortize early, it is limited to 0.25 percent of the amortized capital, reducing to 0.15 as of the fourth year. The rest are 0.5 in the first 5 years and 0.25 from the rest. This in case of variable mortgages

In the fixed ones, the amount is 2 percent during the first 10 years and then 1.5 percent.

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