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Mortgage Law. How Does It Benefit Me?

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The new mortgage law came into effect about half a year ago, but do you really know how does it benefit you? From Hermes & Mathew we tell you in detail.

Also known as the Real Estate Credit Contract Law, the regulations regulate all aspects related to a real estate mortgage. The highlight of the new legal text, in force since last June, is the amount of benefits for the client who requests a loan to buy a home. On the one hand, it improves the conditions and, on the other hand, it also facilitates the management, contracting and application of a mortgage loan. In fact, some specialists point out that with the new law, the beneficiaries can save up to approximately 1,000 euros.

The new mortgage law. What is it?

Since 2016, all countries that belong to the European Union are required to share similar guidelines on mortgage matters. The purpose is to guarantee much safer and more transparent operations by both parties (banks and customers). In this way, it is intended to eliminate certain paperwork and bureaucracy that led to abusive clauses by banks towards customers.

Main novelties of the Mortgage Law

Before explaining the new features, it is important to note that the new law does not apply to contracts signed prior to the date of entry into force of the new regulations, that is, it is not retroactive. Therefore, it only affects real estate loans that are signed from the effective date of the new law.

Leaving aside the technical details of this regulation, the most outstanding news it brings are:

The role of the Notary. The notary will be in charge of solving all the doubts that the client may have about the mortgage loan contract and its completion. In addition, the client who requests a loan of this type is obliged to come at least 10 days before to review all the documentation that the bank has sent to request the mortgage. One of the great objectives of the new law is that the applicant for a mortgage loan is fully informed.

Less expenses. Prior to the entry into force of the new law, the client assumed the expenses of management, notary’s office, home registration and appraisal. With the new mortgage law, the first three will be paid by the bank, which means a saving of between 500 and 1,000 euros on average, depending on the amount of the loan. Banks also assume the documented legal acts tax (AJD), which was previously also paid by the customer.

The appraisal of the home is the only expense that will be borne by the client, who will be able to choose the company he wants without having to be that of the same bank in which he signs the mortgage. In fact, there are banks that also assume this cost.

Limited commissions. Before June 2019, banking entities could charge two commissions when applying for a mortgage loan (the opening and the study) and none of them were limited. With the new mortgage law, you can only charge the opening, which is still not limited, but it must reflect all the costs that each bank wants to pass on to its client.

As for the commissions for early repayment, that is, those that are paid when you want to return all or part of the debt before the term, the new mortgage law also contemplates changes. The two possible commissions that can be charged (the withdrawal commission and the interest rate risk commission) have limits that cannot be exceeded.

Goodbye insurance and policies. With the new regulations, the client is no longer obliged to contract any type of insurance or product that previously the banking entities associated by default. Now, the bank could ask the person for a policy to make sure they meet the credit conditions.

The new mortgage law that came into force in mid-2019 brings interesting advantages for the client. In addition to the process being much clearer and more transparent, you can save a not inconsiderable amount of money.

And if you are considering taking out a mortgage because you want to buy an apartment, remember that Hermes & Mathew is the leading real estate agency in Barcelona. We have a wide portfolio of properties for sale with the best market conditions and in the best areas of the city.