New Mortgage Law

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Do you already know all the changes in the New Mortgage Law? The new mortgage law has many changes that have as their main objective to make procedures in a transparent way that provides the greatest protection to the consumer. In addition to this, legislators must require customers to have knowledge of the smallest detail of the loan, so that they are aware of what they are signing, with a final step prior to the final signature in which the customer will draw up a notarial act before a notary answering a questionnaire and proving that they have knowledge of the product they are going to hire.

New Mortgage Law: 11 Changes

1. Increases foreclosure timeline

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Foreclosure is understood as the procedure prior to the seizure of the property for failure to comply with the cancellation of the installments. In the old law a difference was made between a non-payment in the first half of the mortgage and in the second half, that is, if the mortgagor did not cancel in the first half. Let's suppose that the mortgage is for 10 years and if the mortgage was not paid off in the first 5 years for only 3 months, the mortgage would be foreclosed. 

The new law increases the number of months of non-payment to proceed with the seizure or eviction.

Three per cent of the amount of the capital granted, if the default occurs within the first half of the term of the loan. This requirement shall be deemed to be met when the instalments due and unpaid are equivalent to the non-payment of 12 monthly instalments.

Seven per cent of the amount of the capital granted, if the default occurs within the second half of the term of the loan. This requirement shall be deemed to be met when the instalments due and unpaid are equivalent to the non-payment of 15 monthly instalments.

Subrogation of mortgage.

Any customer who obtains loans with dates after this new law, can subrogate without cost from the third year, for this a compensation mechanism has been established between the two entities that are involved in the change. Based on interest charged and pending interest linked to the cost of formalization of the mortgage. The cost of the subrogation is 0.15% during the first 3 years of the loan.

3. Decreases the redemption fee

Early repayment fees for fixed-rate mortgages were reduced by 50%, 2% for the first 10 years and 1.5% thereafter. In the case of variable-rate mortgages, the customer may choose the commissions agreed for amortization over 3 or 5 years, the commission percentage being 0.25% or 0.15%, as the case may be.

4. Mortgage Novation

Now with the new law, in the case of not agreeing with some conditions signed by you in the mortgage, you are given the opportunity to change them, this will only have a cost for the client if they are modified in the first 3 years with a penalty of 0.15%.

5. Mortgage expenses

It is established that the only concept that the client will pay will be the valuation, opening and insurance, the rest of expenses such as agency, notary, AJD and registration fees will be paid by the bank.

6. Elimination of floor clauses

They are eliminated from the mortgage contracts, now the dation in payment will be voluntary and it will only apply if the parties agree under agreement in the deed of the loan.

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7. Product taxation

Banks will not be allowed to force the customer to purchase any of their linked products in the process, although they will be able to make bonuses for the products they purchase. However, the customer is free to choose the alternative policies of their preference as long as they have the same or better features that the bank offers.

8. Choice of appraisers

Now the client has total freedom to choose the appraisal company of his choice, as long as it is one of the appraisal companies approved to carry out appraisals with mortgage guarantee.

9. Solvency of the Client

The banking entities have the power to evaluate the solvency of "the" or "the" clients who are applying for the mortgage loan before approving the credit. This procedure will not have any cost for the client, since it will be a study carried out by the bank.

10. Mortgage loan project.

Both the clients and the notary must have the mortgage contract at least 10 days before the signing in order to study it and consult it in detail. In the case of the notary, he must carry out a questionnaire to ensure that the mortgagor understands all the conditions of the loan. This questionnaire and the subsequent drawing up of the notarial deed must be carried out at least 24 hours before the final signing of the mortgage loan before the notary.

11. Opening commission

The new law does not prohibit charging an origination fee, so banks may continue to charge this concept, what the new mortgage law establishes is that it will be accrued in a single payment. It will include all the costs such as processing, study costs and granting of the loan. 

So, the benefits of the new mortgage law are focused on consumer protection, and that the costs are distributed equally between the bank and the client.

 

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