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Discover the key features of the new mortgage law

The new Mortgage Law has made its way to our country after having changed its Government twice and three years after the legislation that had been introduced from Brussels. Today, after the threat of a fine for € 100,000 per day until it comes into force, everything continues its course and the Congress of Deputies has paved the way for the new Law to regulate the market and our national economy. 
The new law must now get verified and approved by the Board of Ministers and, once it has been published in the BOE, it will officially come into force in a month's time. According to this information, it is estimated that it could be launched by March 2019. 
The Law was already presented at the Parliament last year and it was Luis de Guindos, the former Minister of Economy of the People's Party, who drafted it. The objective was to guarantee the protection of customers who wished to purchase a home. This new Law will finally get approved by the Government of the Socialist Party after having some changes made to it. 
The truth is that it could not come at a better time, after people took to the streets to fight for their rights and for what they believe is fair. The burning issues? The stamp duty or the AJD tax, the debate about the floor clause and the uneasiness caused by home repossessions. 
This a new legislation that wants to put an end to all those deficiencies in the lending system that both the Spanish and European courts have put on the table. The main objective is to increase the security and protection of people who want to apply for a mortgage with several key points in their favour: an end to ground clauses, the bank will pay the fees, how the banks can charge commissions, the possibility of being able to cancel a mortgage agreement without having to pay any fines and the elimination of the AJD tax payment for first time home buyers. 
Do you want to know more about the key features of the new Mortgage Law? Keep reading this article and we will inform you of everything. 

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The Bank Will Cover the Fees 

The law states that the lender will be charged with the mortgage fees related to registration, management and notary. The only fee that consumers will still need to pay will be the valuation of the property when the amount is between 300 and 600 euros. In addition, the client is free to choose the valuer. 
Similarly, the banks will have to cover the AJD tax, which can vary between € 1500 and € 6000 depending on the area and the loan concerned. The bank will cover the expenses, which implies a considerable increase in costs ranging between 1000 and 3000 euros without counting the AJD tax. 

This Law Provides Better Customer Protection 

The customer must receive his or her mortgage agreement ten days before it is due to be signed. The idea is that the client can have enough time to read through the contract at home before making a decision, so in case of any questions or discrepancies, they can contact the lender. In addition, the bank must provide its customers with a comparison leaflet in order for them to make an informed decision on the best mortgage offers from all the lenders. 
To minimise the chances of mortgage arrears in the future, the bank will be responsible for assessing the client's financial ability before approving the mortgage application. For this, the regulations require the lender to check the credit history of the borrower with the Bank of Spain. 

What Will Be the Role of the Notary? 

The notary's role is to verify and endorse the legal papers and make sure the borrower understands the terms and conditions of the mortgage contract. In the past, the borrower only had to go to the notary once to sign the mortgage agreement. Now, they must go twice, to make any queries about the mortgage contract first before a second visit for signing the papers. 
The law also requires the notary to sign a declaration form confirming he has received the relevant documents and has explained the content (including the fine print) to the client. 

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Latest News On Home Repossessions 

The new Mortgage Law is intended to protect the borrower in the event of a possible home repossession situation. Before, the lender was able to proceed with the property repossession if the borrower was in 3 months arrears. 
The new law has increased the mortgage arrears to 12 months or 3% of the capital so that a financial institution can execute a mortgage contract prior to eviction, or 15 unpaid installments or 7 % In the second half of the loan term. 
In any case, it seems that this change will not be so shocking, since lenders usually have to wait more than three months before proceeding with repossession. 

We Say Goodbye To the Floor Clause 

In effect, the new law does not permit the floor clause and in the case of variable interest rate mortgages, no limit can be set regarding the reduction of interest rate. In this way, the client can benefit greatly when the Euribor falls. The law also states that the minimum interest the lender can charge will be 0% and never a negative rate. 

What Happens With the Arrangement Fee? 

In the past, once a mortgage was approved, customers had to pay the lender an arrangement fee. There were quite significant differences in the arrangement fees charged by mortgage lenders, so while some banks did not charge any commission, others charged their customers 2%. 
The new law does not prohibit the lender from charging this fee, although it does state that the rate must only be charged once and it should include all the fees for setting up the mortgage and processing the application. 

Changes Regarding Mortgage Novation and Transfer 

The borrower has the right to change their lender if he wishes, even to get a better mortgage deal. The new regulation indicates that mortgages granted prior to the law may be freely transferred at no cost. It will be the responsibility of the two lenders to agree on the changes and establish a compensation plan according to the interest charged and the pending payment. 
As for novation, if the mortgage you are offered does not work to your favour, you are free to look for a better deal with another company without the current lender charging you any fees. 

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Complaints to An Official Body 

The Government plans to authorise the Independent Consumer Protection Act so that borrowers can resolve all their complaints and claims related to their mortgage agreements. Currently, the institution that deals with this is the Bank of Spain. 

Early Repayment Charges Are Cut in Half 

Early repayment charges for fixed rate mortgages will be reduced by 2% during the first 10 years. After this period, the charges will be 1.5%. In case of variable rate mortgages, the repayment charges will be 0.25% or 0.15%. 

The New Law On Purchasing Products Linked With the Mortgage 

The new Mortgage Law expressly prohibits the lender to sell the products that are linked to the mortgage, such as credit cards, home insurance, life insurance, etc.

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