Mortgage

The mortgage company closed one of its best recovery years in 2017, with a 9.7% increase over the previous year. Although the Euribor is at historic lows, with negative values of -0.186, and therefore no longer reports for the second consecutive year growth of variable interest for lenders, the best economic conditions have led to an increase in concessions.

However, mortgages in 2018 are no longer given with the same joy as in the years of the real estate bubble and banks set stricter economic conditions for the applicant. The ideal candidate profile would be a high-ranking professional from a local, regional or national administration, around 40 years old and with a monthly net salary of over 3,000 euros.

This or that type of applicant would be granted and the mortgage would be calculated under the best conditions, i.e. for 100% of the sale value of the property to be acquired and for more than 80% of the appraisal price, as well as variable interest plus 1% and with hardly any need to contract related products. From here on down, the nuances that define the offer of mortgages for the common of mortals in 2018 begin and that we explain you next.

Plus fixed interest

The Euribor is expected to remain stagnant in negative values during 2018, but to begin its rebound in the second half of 2019, when the current governor of the ECB leaves office and the entity changes its economic policy. However, this year there are offers with variable interest, but they are linked to a fixed percentage close to 1%, to avoid being negative.

In addition, the low Euribor is compensated by forcing the hiring of numerous linked products -numbers, various insurance policies, accounts, direct debits-, so that the APR is similar to that of fixed-interest mortgages. If you do not want such a link with the bank, you should opt for a fixed interest rate, the amounts of which start at 2.25% and rise according to the applicant’s profile until reaching an APR of close to 4% if the repayment period is very long.

Less capital granted over total valuation

If we are not the perfect applicant, we must make ourselves to the idea that it will be much more difficult that they grant us the 100% of the price of the sale and at the most we will be able to obtain 80% of the value of appraisal of the property, 60% if it is not first residence. Banks are restricting concessions downwards even though they open their hands more than in other years. According to experts, getting concessions for 70% is already an achievement.

You pay the taxes

The Supreme Court’s recent ruling on who should pay the taxes arising from taking out a mortgage makes it clear that we will not be spared either from paying the Stamp Duty or from registering the property in our name. In fact, banks have rarely agreed to pay it and have lost very few lawsuits in this regard.

The notary and other expenses, halfway through

Another thing is the rest of the expenses, which the Supreme Court’s own ruling determines must be paid halfway or reaching a balanced agreement between the lender and the applicant. In this respect the mortgages offered vary their policy depending on which bank is involved. It is advisable to consult the distribution of notarial payments, studies, management and valuations, etc.

More related products

The banks are trying to compensate for the negative values of the Euribor and the low expectations that it will grow at profitable levels in the coming years by means of numerous linked products, especially insurance products, which will increase our monthly payment. This is the case of household policies, which are compulsory in Spain.

According to the Rastreator comparator, only 33.8% of citizens claim to take out this insurance because they comply with the law. However, there is the possibility of avoiding this strong link with other types of policies and services by taking out higher interest rates.

More punishment in long-term mortgages

The average duration of the mortgage offer for 2018 is around 20 years, with an average bond and interest rates below 3% APR. If we want to increase the repayment time, the APR will reach values higher than this 3%, and higher if our monthly income is less than 2,000 euros.

More difficult to be evicted

On the other hand, the new mortgage law, which is expected to come into force in the second half of the year, hampers evictions by not allowing banks to execute an early maturity with only three unpaid installments. On the contrary, this step, prior to the eviction, will only be possible if in the first half of the life of the mortgage an unpaid amount of 2% of the total debt is accumulated, or in the second half the amount exceeds 4%.

More informative clarity

Also thanks to the new mortgage law we will have to be informed adequately and with total clarity of the conditions and clauses of the mortgage. In fact, the bill even stipulates that notaries must examine us to certify that we have understood the contract in its entirety.

What happens to my earnest money contract if the bank has stopped signing mortgages?

Faced with the legal uncertainty caused by the recent rectification of jurisprudence by the Supreme Court, banks have temporarily suspended the signing of those mortgages with fringes to negotiate. The Supreme Court in its ruling of 16/10/2018 points out that it is the entities and not the clients who must pay the tax on legal acts documented in the public deeds of the mortgages.

And now that the bank has paralysed the signing of the mortgages, we wonder what happens to my deposit contract?

Take for example the case that you are obliged by contract to sign in X time of a sale and if this period is fulfilled without being signed leads to the loss of the deposit and the home to buy, but in this case the fault is not yours as a buyer.

What happens then?

  • If it has been foreseen in the contract of deposit that in the case that the sale cannot be signed by some external fact like buyer or by a cause imputable to the banking entity, you should only renegotiate the terms of the sale again with the sellers.

  • If the deposit contract does not stipulate that for other reasons it is not penalised, and you are in danger of losing the deposit and the home, it is recommended that you renegotiate the deposit, extending the period for the purchase and sale and emphasising the exceptional situation. And if it is not possible to carry out this negotiation, initiate a claim against the bank for the damages caused.