Spanish Mortgages: New Credit Finance Laws Now in Force

Spanish mortgages

Spain’s new credit finance laws, otherwise known as la Ley de Contratos de Crédito Inmobiliario (5/2019), came into force last Sunday 16th June, which is great news for everyone researching Spanish mortgages and looking to make the purchase of their dream property.

The new laws provide greater transparency for home buyers and mean mortgagors incur fewer costs. As you will read later in the post, I attribute part of the optimism shared by buyers of Spanish property regarding their ability to acquire real estate to these improved borrowing conditions.

Months in the making

If you remember, I wrote a blog post around three months ago which explains 3 ways in which the changes in Spanish mortgage law will benefit home buyers. In theory, the legislation was only due to be one month away at the time of writing, but, as is often the case, its inception was slightly delayed.

Anyhow, In that post I make mention to the fact that many upfront mortgage costs are now to be borne by the banks, the “floor clause” was to be snuffed out for variable rate loans and other “abusive clauses” were to become a thing of the past.

Well, that’s exactly what’s happened this week with the new credit finance laws coming into force. And it’s important for several reasons.

Why is this significant?

One reason is that it was simply about time to remedy the contribution imbalance between mortgagor and mortgagee. Besides making mortgages slightly more accessible to first-time buyers, the existing laws were somewhat outdated and some clauses doubtless seemed a bit backward - especially to overseas home buyers in Spain.

Take associated banking products, for example. One time of day you would have had to probably take out life insurance, home contents insurance and any other accompanying coverage with the financing entity before you could even think about getting your mortgage approved.

Many foreigners are used to cherry-picking their banking products from various providers, so freedom from this obligation, as well as others (remember, this is just an example), makes the prospect of buying property in Spain that bit more enticing...

The main reason

…which leads me onto the main significance of the new credit finance laws: making buying property in Spain more attractive.

Although the Spanish financial sector has not exactly welcomed the legislation change with open arms due to the extra costs it will have to stump up for – thereby putting a (minuscule) dent in each company’s profits – it is great for the prospective buyer.

Favourable market conditions

Many different factors have converged to make the current climate favourable for prospective buyers. Confidence in the real estate sector has also increased, namely due to details such as the improvement of Spain’s overall economic outlook, the unprecedented attraction of foreign investment, an increase in employment and, of course, better mortgage conditions.

In terms of quantifying consumer confidence in the property market, one set of recently published figures shows that 59% of Spaniards believe that now is an advantageous time to buy¹. Another (separate) study claims that 17% of Spaniards over the age of 18 who didn’t buy a property in the last year plan to do so in the next five years².

Do you share the same confidence as the Spanish? And, if you are going through the property buying process on the Costa del Sol at the moment, how are you finding your experience? As always, let me know in the comments below!

Sources:

¹ http://corporate.solvia.es/la-confianza-los-espanoles-comprar-una-vivienda-se-estabiliza-terreno-positivo/

² https://prensa.fotocasa.es/el-17-de-los-espanoles-que-no-han-comprado-vivienda-en-el-ultimo-ano-se-plantea-hacerlo-en-los-proximos-5-anos/

Photo taken by Luis García (Zaqarbal) on June 21st, 2015. Hereby published under GFDL and Cc-by-sa-3.0-ES licenses.