Many of the buyers who purchase a new property on the Costa Blanca need financing [ https://www.esphouses.es/servicios/hipotecas/ ] to complete the transaction. This is also the case for many foreign buyers. This sector tends to turn to Spanish banks to arrange their loans. Source: blog.modernhousespain.com The New Real Estate Lending Law came into force on June 16, 2019. How does the New Real Estate Lending Law affect foreign buyers? But how does the new mortgage law affect foreigners who decide to buy a newly built home in Spain? Today we want to focus on this group of buyers to explain in a simple way the changes they will find in the new mortgage loans. [ /upload/medialibrary/32a/32ab1f79473ea3c4b9b117ce3e987486.png ] Lower the cost of loan agreements The distribution of costs associated with mortgage changes. To avoid abuses by banks, the costs of contracting loans taken from June 16, 2019 will be distributed as follows: Lower commissions for repayment The following maximum limits have been established for early repayment commissions: - Fixed-rate mortgages: 2% in the first 10 years of the loan and 1.5% from the eleventh year onwards. - Variable rate mortgages: 0.25% in the first 3 years of the loan and 0.15% as from the fourth year. Also, with the new mortgage law, the client will be able to subrogate his mortgage without additional costs. The banks involved in the subrogation will have to establish a compensation mechanism based on the interest already paid and the interest not yet paid. Goodbye to floor clauses There is no longer any place for floor clauses in the new regulations. Therefore, if the Euribor falls, mortgage payments will also fall, but they can never be lower than 0. This means that the customer will never be able to receive money from his bank, even if the interest rate reaches negative figures. Limitations on linked products The bank may still insist on property insurance or a policy to guarantee repayment of the loan, but it can never force the customer to take out the aforementioned insurance policies with the bank itself. The contracting of products linked to the mortgage will always be voluntary. * Note: banks may continue to charge origination fees for the formalization of real estate loans. [ /upload/medialibrary/a39/a395b7f27843952567b23e7855d100d8.png ] Greater transparency At least 10 days in advance, the bank must provide the buyer with the following documents: Standardized European Information Sheet, with all the details regarding the mortgage. Standardized Notices Sheet, with the most relevant clauses of the contract and the indexes used for the calculation of the interest rates. In addition to this new documentation, the client will have the obligation to go twice to the Notary. Once on the day of signing, and once 10 days in advance so that the Notary can inform them in a simple way about the most sensitive points of their contract. What does this mean? Although a priori, the new Spanish mortgage law could be beneficial for new mortgage holders due to the greater security and transparency and the lower amount of savings they will need to access their loans, in the long term this new regulation could make mortgages more expensive. In the last few months, we have observed that the main Spanish banks have increased the interest rates of their mortgages to cover the additional costs they will have to assume. In addition, they will always be able to continue playing with the arrangement fees. If you want to buy a new development on the Costa Blanca but are unsure how to arrange your mortgage loan, ESPHOUSES has a team of loan arranging and management specialists at your disposal who specialize in international buyers. Contact us and we will inform you of everything you need to know about the new mortgage law in Spain.