Mortgage Loan : Jesús Benavides Notary Office

Step 4

More frequently asked questions

Normally every mortgage loan contract, regardless of the financial entity chosen, presents the same structure divided into two large blocks: the financial clauses and the general non-financial clauses. In this section we answer all the possible doubts that may arise, following the order of the clauses that you will find in your future mortgage loan notarial deed.

Financial clauses

What is loan principal?

The capital of the loan is the amount that the buyer of the house will have to request to the financial entity to, together with the own funds at his disposal, face the payment of the purchase price agreed in the real estate transaction, so that the capital of the loan is, in short, the amount of money that the financial entity is going to leave us so that we can pay the purchase price of the house that we wish to acquire.

When does the delivery of the principal to the debtor occur?

The delivery of the capital for the acquisition of the property will take place on the same day on which the contract of sale of the property is executed, so that, almost simultaneously and consecutively, that is to say, at the same time, the buyer will sign the deed of sale and purchase and, immediately afterwards, formalize the mortgage loan deed in which this obligatory relationship between the mortgagor and the creditor financial institution will be reflected.

How does the delivery of capital to the debtor occur?

The day we acquire our property, as indicated above, we will first sign our deed of sale, using the funds that will have been paid to us that same day by the financial entity, normally by means of a bank check or by means of an immediate transfer via the Bank of Spain to the seller's designated bank account, to then sign the loan contract in which the assignment of capital, its conditions and repayment term are included.

How much can the bank lend you for your mortgage?

Normally, financial institutions consider that a person or family unit can assume a monthly mortgage loan payment of between 30% and 40% of their net monthly disposable income.

Therefore, if we want to know what is our maximum capacity of indebtedness, we will have to add up all our monthly net income (for example, "a married couple in which both spouses earn 2,000 € net, have a total of 4,000 € monthly to face their family economy"). To this figure, we must apply the aforementioned percentages (30-40%), which, for example, in the case proposed, "yields a result of between €1,200 and €1,600", so that if the monthly payment of the loan that is sought is within these thresholds, the operation would be, a priori, viable, while, on the contrary, if the resulting payment, or the sum of this payment together with that of other previous debts exceeds these limits, the operation will hardly be approved by the financial institution.

What percentage of financing will I be granted?

Without prejudice to the specific particularities of each transaction, the general criterion of financial institutions is not to grant loans for an amount greater than 80% of the appraised value of the property (i.e., the value objectively assigned to the property by a company engaged in the appraisal or valuation of real estate, which must be contracted to perform this work) or, if applicable, 80% of the market value assigned to the property by the institution.

Therefore, in order to be eligible to purchase a property, the buyer must have at least 20% of the purchase price, while up to the remaining 80% will be covered by the loan requested.

Thus, by way of example, "if you intend to purchase an apartment whose sale value is 300,000 euros, if its appraisal value coincides with this amount, in order to be able to purchase it, you must have savings of at least 60,000 euros".

Will I have to pay taxes when I purchase my home?
It isnecessary to take into account that real estate purchase and sale transactions are subject to indirect taxes, that is, the Value Added Tax in the case of new construction or the Transfer Tax in the case of used housing. Broadly speaking, and without going into the details of the tax regulations, it is accepted common practice that the tax burden of a home purchase operation will amount to approximately 10% of its cost, so that if, for example, "I wish to purchase a property worth 300,000 euros, an additional 30,000 euros must be available to cover these taxes".

Do I have to pay any additional expenses to acquire my property?
Ifyou wish to properly formalize the purchase operation with the maximum guarantees and legal security, it will be necessary and appropriate to instrument the purchase of the property through a public deed authorized by a Notary Public, that is, a public official, professional of the Law, whose mission consists of attesting the acts and businesses that he/she authorizes and to watch over the legality of everything that is agreed in them. In addition, if it is desired to enjoy the protection that grants the registry publicity of our right in front of third parties, it will be necessary to register the deed of sale and purchase in the corresponding Land Registry.

Both operations, that is to say, both the granting of the deed and its inscription in the Land Registry, have a cost subject to a tariff fixed by the State, which, roughly speaking, can be between 1 and 2% of the cost of the operation, so that, for example, "if one wishes to acquire a house of 300.000€, it would suppose a total amount of between 3.000€ to 6.000€".

Thus, these amounts must be taken into account to know what is the maximum amount that my financial institution can lend me.

What total amount do I need to have saved to buy my home?

If we wish to acquire a house, beyond the capital that a financial entity can lend us, we will have to count on previous own funds of, approximately, 32% of the cost of sale of the property, to face, at least, 20% of the price with our savings (which is the minimum that the financial entity will demand from us), 10% of the operation, approximately, to pay the taxes that encumber it, as well as between 1 and 2% additional to cover the expenses of Notary and Registry of the Property.

Thus, by way of example, "if we wish to acquire a house whose sale price is 300,000 euros, that 32% would mean the amount of 96,000 euros; of which 20% will correspond to the part of the price that we will have to pay with our savings (60.000 in the example), 10% to pay the taxes of the operation (approximately 30.000€ in our example) and between 1 and 2% to pay the Notary and Land Registry fees (that is, in our example, a maximum amount of around 6.000€)".

Is it necessary to observe any formalities in order to take out a mortgage?

In accordance with the regulations in force, for a mortgage to be validly constituted, it must be registered in the Property Registry, for which it will be necessary that the mortgage has been formalized in a public deed authorized by a Notary Public. Thus, effectively, in order to be able to have access to our loan with mortgage guarantee, it will be necessary to formalize the operation in a public deed and, a posteriori, to register the same one in the Registry of the Property.

In any case, all these formalities will usually be carried out by an agency or by the notary's office itself, without the buyer having to worry about carrying out all these bureaucratic acts.

What is an interest rate subsidy agreement?

This is an agreement between the mortgaged debtor and the creditor financial entity, by virtue of which, in exchange for contracting a series of additional products (such as insurance contracts, pension plans, direct deposit of payroll, contracting credit cards, home security alarms, etc.) the initially agreed interest rate will be reduced in favor of the debtor.

Is it mandatory to contract additional products in addition to the loan?

The answer to this question must be negative, in the sense that it is currently strictly forbidden to market, together with a loan, other products in a sort of "single and indivisible pack".

In order to properly understand this issue, it is necessary to take into account that, unfortunately, in recent years, financial institutions, in order to generate more profits, have linked the granting of loans to the contracting of additional products (such as insurance, pension plans, investment funds, direct deposit of payrolls, credit card registrations, security alarms, cell phone financing, etc.), so that if the mortgagor did not contract these products, the financial institution would refuse the operation.

In view of this banking malpractice, the regulator, in the recent Law 5/2019, of March 15, regulating Real Estate Credit contracts, has put a stop to it, establishing a strict regulation on these practices.

Thus, at present, the linked sale of banking products in the contracting of a loan, i.e., the offering of a joint package consisting of the loan and other additional products, offered together, is completely prohibited, under penalty of nullity of any contract linked to the loan in question.

Are there any exceptions to the ban on tied sales?

Starting from a general prohibition of linked or joint sales, the legislator establishes a series of exceptions of which the consumer should be aware, as described below:

Firstly, it will be possible to link the contracting of the loan to other additional products when this is expressly authorized by the Bank of Spain, in the event that such product or service, compared to other similar products of competent companies, entails a clear benefit to the borrower.
Also, the contracting of the loan may be linked to the mortgagor taking out life insurance (to guarantee compliance with the obligation contracted in the event of the death of the mortgagor), as well as damage insurance on the mortgaged property (to ensure that, if the property serving as collateral for the loan suffers any damage, it can be repaired).
Additionally, the contracting of certain related products by direct relatives of the debtor may be required, when they appear in the transaction as guarantors and their contracting serves as support or insurance for said credit transaction.

Is there any kind of product that must be additionally contracted?

Together with the loan guaranteed by mortgage, there are two products whose contracting will be obligatory, that is, a life insurance (to guarantee the fulfillment of the contracted obligation in case of death of the debtor), as well as a damage insurance with respect to the mortgaged property (to ensure that, if the property that serves as guarantee of the loan suffers any damage, it can be repaired).

In any case, the compulsory contracting of these two products should not be carried out invariably with the financial entity that grants the loan, since if we find a similar product with better economic and coverage conditions in a competing company, we can contract this one to the detriment of the insurance offered by our bank, which had worse conditions.

What is combined selling?

The combined sale, as opposed to the linked sale, is the sale of additional products (pension plans, direct deposit of payroll, contracting of cards, etc.) is carried out separately, so that the debtor receives an individualized offer detailing the separate conditions of each product, so that he can evaluate them individually and decide, if necessary, whether it is convenient or not to contract them.

What are the benefits of taking out combined products?

If the financial entity offers us an interest rate rebate agreement in the case of contracting a certain financial product or service, we will obviously have to evaluate this offer and determine whether the interest rate reduction is sufficiently attractive or not.

Likewise, from an operational point of view, contracting all our financial and insurance products and services with the same company simplifies the administrative procedures that we must carry out, and also strengthens our future negotiating power with the entity, since if we have many products contracted, given the risk of losing us as customers in the future (which would have a strong impact on their margin), it is possible that they will offer us better conditions for subsequent contracts.

On the negative side, if we contract all our products with the same entity, we may be renouncing more aggressive offers from competing companies that could offer us a better price or better service conditions.

See more frequently asked questions

What is the pay table?

The table of payments, or amortization of a mortgage loan, is a document in which all the payments that the debtor must make throughout the life of the loan are collected, so that before signing our loan, we will know how many installments we will pay, of what amount, what amount of principal and interest each installment includes and what is the amortized capital and the outstanding capital, at each moment.

This amortization table is a document that must be provided by the financial entity during the negotiation process of our loan, as the law requires it to be part of the pre-contractual information of the operation to be included in the so-called European Standardized Information Sheet (known as FEIN). With this, the protection of the mortgage consumer is guaranteed, since he is perfectly informed of how his loan is going to behave throughout its life cycle.

What does a pay table look like?

The following is a simulation of a repayment schedule for a loan of 10,000 euros, with a repayment period of 12 months, and an interest rate of 5%:

How is the amount of each installment calculated?

The amount of each monthly installment of my loan will be determined by the mathematical formula corresponding to the amortization system that has been agreed upon, to which the requested capital, the agreed interest rate and the agreed repayment terms must be applied.

What is the TIN?

The nominal interest rate, also known by the acronym TIN, is the interest rate that the debtor of the loan will pay to the financial institution, which will be determined by a specific percentage if the mortgage loan has been agreed at a fixed rate, while, if it has been referenced to a variable rate, it will be determined by the current amount of the reference index plus the differential that has been agreed.

"Thus, by way of example, if a fixed rate of 2.5% has been agreed, the NIR of the transaction is that 2.5%, whereas if the agreed interest rate were variable, referenced to the EURIBOR (which at that time was quoted at 1%), plus a differential of half a point, the NIR of the transaction, at that time, would be 1.5%".

What is the APR?

The Annual Percentage Rate, also known by its acronym APR, is a financial mathematical formula that allows us to know the real cost of a credit operation, taking into account the periodicity of payment of its installments, as well as the other commissions and expenses that the operation may entail, beyond the nominal interest (or TIN) of the same.
Thus, the APR is the reference value that we should use to assess the real cost of our loan.

How can I calculate the APR?

The calculation of the APR is obtained through a financial mathematical formula that takes into account the capital requested, the nominal interest rate, the repayment term and the frequency of payment of the installments (annual, quarterly, monthly), as well as the additional expenses and commissions of our loan.

The APR of our credit operation must be provided by the financial entity, both in the pre-contractual documentation of the loan and in the loan contract itself.

However, if we want to check the APR of our transaction, the banking regulator (i.e. the Bank of Spain) provides us with an online calculator where we can obtain the APR of our loan(click here).

What is the difference between the NIR and the APR?

If the TIN expresses, in a simple way, the nominal interest rate applicable to the operation, the APR is a more complex value (to obtain it we must apply a mathematical formula) that takes into account additional variables beyond the interest rate, such as the repayment term, the frequency of payments, as well as other costs and commissions of the operation.

Thus, the APR is an indicator that shows us more reliably and adequately the real cost of the operation, and allows us to adequately compare different loan options with different durations, interest rates or additional conditions (costs and commissions).

Therefore, the consumer should take as a reference the APR of the operation to adequately assess whether the offer received is adequate or not, as well as its possible comparison with other options that may be offered by other financial institutions, in order to choose the one that best suits him/her.

What is interest on late payment?

The interests of delay, or also known as moratorium interests, are those interests that the debtor has to pay to the mortgage creditor in case of a nonpayment of one or several installments of the loan.

Thus, the interests of delay are constituted in a sort of penalty or compensation that the debtor must satisfy to the Bank or Savings Bank to compensate him for the losses and damages that generates to him that nonpayment of the debt.

Is there any legal limit to interest on late payment?

Pursuant to Article 25 of Law 5/2019 of March 15, 2009, regulating real estate credit agreements, when such rule is applicable (i.e., for credits entered into between a consumer, as debtor, and a professional, as creditor, for the purchase of residential housing), the interest for late payment may not exceed by 3 percentage points the interest on the loan that has been agreed.

"Thus, byway of example, if a fixed rate of 2.5% has been agreed, the interest for late payment applicable to the loan may not exceed 5.5%".

On what amount will late payment interest be calculated?

Pursuant to Article 25 of Law 5/2019 of March 15, 2019, regulating real estate credit contracts, when this rule is applicable (i.e. for credits concluded between a consumer, as debtor, and a professional, as creditor, for the purchase of residential housing), the interest for late payment shall be calculated on the principal outstanding and overdue, i.e. on the unpaid debt.

"Thus, for example, if 3 installments of €1,000 each are owed, the late payment interest will be applied on those €3,000".

Likewise, the aforementioned regulation establishes that this late payment interest cannot be capitalized, so that late payment interest cannot be charged on the late payment interest already generated, which protects the debtor and avoids incurring in the so-called anatocism, which would significantly increase the debt of the individual with the financial entity.

If the law establishes a limit on interest for late payment, can a higher interest rate be agreed with the financial entity?

The answer to this question must be in the negative, since in accordance with Article 25 of Law 5/2019 of March 15, 2009, regulating real estate credit agreements, when this rule is applicable (i.e., for loans entered into between a consumer, as debtor, and a professional, as creditor), the limits on interest for late payment (i.e., as a maximum of three percentage points higher than the interest rate on the loan) do not allow any agreement to the contrary, for the purchase of residential housing), the limits to the interest for late payment (i.e., a maximum of three percentage points higher than the remunerative interest of the loan) do not admit any agreement to the contrary, so that if a higher interest rate is agreed or the financial entity imposes a clause with a higher percentage, the same would be null and void.

If I am unable to pay my loan, and the bank initiates foreclosure proceedings, is my farm liable without limit for all interest generated?

If indeed the debtor presents a very adverse economic situation, so that he cannot afford the installments of his loan in a repeated way, so that the non-payments of the monthly payments accumulate without a hint of being able to revert the situation, the most probable thing is that the financial entity initiates a judicial procedure of mortgage execution, to try to recover the generated debt and the accrued interests.

In such a case, it is necessary to know that our property will not be liable for all the debt generated, but will be liable, at most, for the maximum mortgage liability that has been agreed (articles 12 and 114 of the Mortgage Law), which includes the principal of the loan, the agreed interest, both interest and late payment, as well as the legal costs and expenses of the process.

Thus, with regard to this maximum mortgage liability of the property, it is necessary to point out that with regard to the unpaid interest, both remuneration and late payment, Law 5/2019 establishes limits to the same, so that our property can only be liable for up to 5 years of unpaid interest (art. 114 of the Mortgage Law and 220 of the Mortgage Regulation).

If I took out my mortgage years ago, and it has very high interest rates for late payments, have the courts established a limit on these rates?

Indeed, if you formalized your mortgage years ago, before the entry into force of Law 5/2019, so that in your mortgage loan contract very high late payment interest rates are established, you can resort to a judicial process to try to have such clause declared null and void, given its abusive nature, that is, that it involves an unreasonable disproportion in favor of the financial institution and to the detriment of the consumer.

In this regard, the doctrine of the Supreme Court on this matter should be taken into account (Judgment 364/2016, of June 3), in which it is established that late payment interest that exceeds the agreed remuneration interest by 2 percentage points will be abusive.

Furthermore, it must be taken into account that if indeed these agreed late payment interests were abusive, they would entail the declaration of nullity of the clause in question, so that they could not be moderated or reduced to a lower figure, but in such case only remuneration interests may be charged, but not late payment interests (which are usually higher and significantly increase the debt with the financial entity).

What is a loan?

A loan is a type of contract, entered into between two parties, by virtue of which one of them, called creditor, lends to the other, called debtor, an amount of money, committing the debtor to return that amount of money within a certain period of time, normally through a return spread over time by means of the payment of periodic installments (monthly is the most common) until the return of all the capital loaned is achieved.

Also, since it is an onerous business, the creditor, in exchange for lending money, receives a consideration in the form of an agreed interest rate, so that the debtor, in addition to returning the loaned capital, pays the creditor an interest rate at which the creditor obtains a profit.

What is a mortgage loan?

A mortgage loan is a type of loan in which, given the usual high amount of the loan, the creditor requires, as an additional guarantee to ensure compliance with the monetary obligation (i.e., to repay the money lent), the constitution of a real right of mortgage on a property owned by the debtor, so that, in the event of non-payment, in addition to the property and assets that the debtor has in its patrimony to pay the debt, the creditor will have the right to request, through the corresponding executive judicial process, the sale of that property in order to, with the money obtained from it in an auction, satisfy the amount of the debt in question.

Thus, in reality, when a mortgage loan is signed, two distinct legal acts are being carried out. In the first place, a loan contract, and in addition a second act, that is, the constitution of a real right in favor of the mortgagee.

What is a mortgage loan for?

In fact, a mortgage loan can be used to finance any desired transaction, from the purchase of a property, or a car, or even to obtain the necessary capital to start a business or to make an investment in an existing one.

In short, the constitution of a real right of mortgage on a property owned by a debtor, as security for a loan transaction, is a resource that can be used to finance any kind of transaction, regardless of the destination of the money lent, if so agreed by the contracting parties.

However, the reality of the market shows us that, given the current high price of housing, most people who are considering the acquisition of a property do so by resorting to credit from a financial institution, and it is in those cases, to ensure compliance with the payment of that debt for the purchase of a home, that the contracting parties resort to the constitution of the real right of mortgage on the property in question, in order to provide greater guarantees for the credit operation, make it viable and thus ensure that the majority of the population has access to a home in property.

Is a mortgage loan only for the purchase of a primary residence?

Of course, the answer to this question is no, so that, although it is usual for most families to take out a mortgage loan to acquire their first home, or habitual residence, that is, the one in which they usually live most of the year, it is no less true that, if they have sufficient economic capacity, they can take out a mortgage loan to acquire a second home for holiday leisure.

In short, the habitual thing is to contract a mortgage loan to acquire our habitual housing, but if one has sufficient income, and a financial organization grants it to us, there is no impediment whatsoever in contracting a second or ulterior mortgage loan to buy a second residence.

Are there differences between the applicable rules depending on the dwelling or the contracting parties?

Indeed, taking into account the importance that the acquisition of a primary residence represents for any average family, there is an abundance of regulations that specifically regulate, with a bias towards greater consumer protection, those mortgage loan transactions intended for the acquisition of a residential dwelling, as for example can happen with Law 5/2019, of March 15, regulating real estate credit contracts, or in the rules of the Civil Procedure Law relating to mortgage foreclosure, in which greater protection and more advantageous regulation is offered on habitual dwellings than with respect to any other.

Thus, as indicated, depending on the type of contracting parties, i.e., if the debtor is a private individual and the creditor is a professional, or depending on the type of property purchased (for example, if it is a habitual residence or not), the regulations governing the transaction will be one or the other.

General clauses

What is the domicile of payment in a mortgage loan?

In the minutes of the loan with mortgage guarantee, it is necessary that the parties, especially with regard to the mortgaged debtor, that a specific address is fixed, since any kind of reliable notification that the creditor entity must make to the debtor, in relation to any vicissitude that may occur throughout the life of the loan contract, will be made at the same address.

"Thus, for example, if a default occurs and the financial entity has to claim the unsatisfied debt, it may do so by giving reliable notification of the claim for such default at the address fixed by the parties".

In practice, in the majority of transactions, the mortgaged property itself is established as the payment address for notification purposes, unless it is a second residence used for holiday leisure, in which case it can be agreed to establish the debtors' habitual residence as the address for notification purposes.

What is the associated deposit in a mortgage loan?

The associated deposit of a mortgage loan is the bank account in which the debtor will domicile the receipts of the loan, so that, in each period that has been agreed (normally, month to month), the Bank or Savings Bank will send us a receipt to that account to collect the corresponding monthly payment of our mortgage loan.
As an extension, bear in mind that if a mortgage loan is requested in a certain financial entity, the normal and reasonable thing is to have a bank account in the same one, in order to facilitate the payment of these receipts by both parts.

Can a loan be constituted in a currency of another country?

Indeed, it is legal and perfectly possible to constitute a loan in a currency other than the Euro, which is the legal tender in Spain. In this case, both the capital loaned and the installments to be repaid will be indexed to the other currency chosen (such as the US dollar, the Japanese yen, etc.).

Is it advisable to constitute a loan in another country's currency?

Regarding this kind of operations, it is necessary for the consumer to be very aware that they present a high risk, since the existing debt will vary not only according to the money we pay back month by month, but also according to the exchange rate of the currency in question. Thus, if that other currency experiences high appreciations, and our income is in euros, it will be much more expensive for us to have the necessary currencies to pay each monthly installment, so our debt will grow. On the contrary, if the fluctuation were favorable to our interests, in the event of a depreciation of that currency, we would benefit from the operation.

In view of the above, it does not seem reasonable that a private consumer, without extensive knowledge of the functioning of the financial and currency markets and with income in Spain in Euros, should take out a mortgage loan of this nature, since depending on the fluctuation of that currency, he could lose a lot of money, as has already happened in past decades in the Spanish financial sector, in which many people, in order to save money, took out mortgages referenced to the Japanese Yen and lost large amounts of money (we are talking about hundreds of thousands of Euros).

However, if you have extensive knowledge of finance and currency exchange rates, or if you earn income in that currency (for example, someone who collects rents in that country with that currency, or works for a foreign company that pays his salary in that currency), if the market conditions are favorable, it can mean a considerable saving of money.

If I have a checking account in a bank, is the money I have deposited in it guaranteed?

Indeed, at present, in order to guarantee the solvency and confidence of depositors in the Spanish financial system, the so-called Deposit Guarantee Fund, which is a public credit institution that, fed by the contributions made by the financial institutions themselves, guarantees up to €100,000 per deposit.

Thus, if any person has a bank account with up to €100,000 in a Spanish financial institution, and the latter has a liquidity or solvency problem that makes it impossible to meet the withdrawal requests of its depositors, to the point of bankruptcy of the Bank or Savings Bank, the Deposit Guarantee Fund would come into play, ensuring that individual savers recover their money, up to the aforementioned limit of €100,000.

What total amount do I need to have saved to buy my home?

Is it necessary to observe any formalities in order to take out a mortgage?

What is a mortgage?

The mortgage is a real right that is constituted on a property (property of the debtor), together with the loan, to guarantee the fulfillment of the main obligation, that is, to repay the money lent. Therefore, if there is a default on the loan, the financial entity, as creditor, may initiate a judicial foreclosure proceeding in order to have the property auctioned so that, with the money obtained from the best bid, it can recover the money loaned and the interest accrued, as well as the expenses and costs generated by the judicial proceeding.

Is it necessary to formalize a mortgage in a public deed?

The acquisition of a property, in principle, can be formalized in a private document signed between buyer and seller in which all the clauses of the contract in question are included.

However, this practice, at the present time, is practically banished from the reality of the economic traffic, since to assure the legality of the contract, as well as the legal security of all the parts, the most advisable thing is to formalize this transaction of sale and purchase before a Notary Public, since this one, as a public official expert in private law, will watch over the verification of the identity of the contracting parties, the assurance of the ownership of the property to be transferred, as well as the legality of all the clauses and stipulations agreed upon by the parties, which undoubtedly offers the peace of mind that the legal business that is being celebrated, which is of crucial importance in the life of any person, is carried out in an unpolluted manner and without any risk for any of the contracting parties.

Thus, if this is the case with regard to the contract of sale of the property, the question becomes even more important in the event that for the acquisition of the property a loan must be taken out with a financial entity, since the same, in order to guarantee the payment of the debt that is contracted, will require the constitution of a mortgage on the property in question, for which, as a formal requirement, the granting of a public deed will be required, since this is required by article 145 of the Mortgage Law.

Is it necessary to register the mortgage in the Land Registry?

Indeed, in addition to the formal requirement to convey the mortgage through a public deed authorized by a Notary Public, it is necessary that the mortgage be registered in the Land Registry where the property is registered, as required by the applicable regulations, such as article 1875 of the Civil Code or article 145 of the Mortgage Law.

This will ensure that our mortgage is perfectly validated by two public officials specialized in preventive legal security (i.e., the Notary of the transaction and the Property Registrar), thus ensuring that the mortgage real right complies with all the requirements and guarantees of the current regulations.

What is the Land Registry?

What is the cost of the mortgage deed and its registration?

The granting of public instruments before a Notary Public, as well as their registration in the Land Registry, are subject to a cost, which is determined and prefixed by an official regulation, in which, through a tariff, the fees to be charged by Notaries and Registrars are fixed, depending on several variables, such as the amount of the transaction, the extension of the document, etc.

In any case, bear in mind that since the entry into force of Law 5/2019, of March 15, 2009, regulating the real estate loan contract, the financial entity must be the one to bear the cost of the granting of the mortgage loan deed, as well as its registration in the Property Registry, since it is the interested party in the constitution of said guarantee.
However, the interested party must understand that this price transfer may be fictitious, because although the law so establishes, it is reasonable that the banks, depending on their marking power, end up transferring this cost to their client through an increase in the interest rate applicable to the operations.

What is the Land Registry?

The Land Registry is a public institution whose purpose is the registration or annotation of acts and contracts relating to ownership and other rights in rem over real estate.

Thus, the Land Registry is an instrument that provides legal certainty and publicity to the real estate market, since it records all the properties in a given territorial area, with a description of their location, size and characteristics, as well as, most importantly and interestingly, their owners and the rights or encumbrances that may weigh on those properties.

Therefore, if we want to buy a property, the Land Registry will help us to know the real size of that property and its characteristics, as well as who are its owners and the possible encumbrances that may have that property. With all this information, we will be able to know the reality of that property, who are its owners and what is its real value, taking into account the charges or encumbrances that can damage or limit the use or enjoyment of that property.

What is the Cadastre?

The Cadastre is a public registry, of an administrative nature, dependent on the Ministry of Finance, in which rural and urban real estate is graphically described.

Thus, the cadastral registry contains a description of each property, with details of its physical, economic and legal characteristics, including its location and cadastral reference, its surface area, its use or destination, the quality of its buildings, its graphic representation or its market reference value.

What is the relationship between the Cadastre and the Land Registry?

Since 2015, with a legislative reform, there is a system of coordination between the Real Estate Cadastre and the Land Registry, so that, gradually, the Land Registry will incorporate the graphic description of the registered properties, with their georeferencing, using as a basis the registry mapping.

With this innovation, all legal operators will see an increase in the legal security of the real estate market, since by consulting the Land Registry it will also be possible to know the location of the property and its delimitation.

What should I do if I want to know who is the owner of a property?

If I am thinking of buying a property, and I begin to negotiate with the seller, the reasonable thing is, in the first place, to make sure that the person with whom we are negotiating is the real owner of that property.

To get this information quickly and safely, we simply request a simple note to the Land Registry where the property is registered. With it we will obtain, in a very fast way (in the same day, or the following working day), to know the description of the property, who are the real owners, as well as the charges or encumbrances that could weigh on the property, and all this for a very reduced price, since the simple notes cost a few Euros.

In any case, it is necessary to know that the simple note only has informative effects.

What is a registry certification?

A registry certification is a document issued by the Property Registrar certifying the description of a property, its ownership and encumbrances.

Unlike the simple note, which only has informative effects, the registry certification enjoys the registry public faith and makes proof of its content in front of third parties, with which, if it is desired to obtain this information to contribute it to some judicial process or administrative procedure, the registry certification would be the most suitable instrument.

In any case, from an economic point of view, the registry certification has a higher price than the simple note.

What is the farm description?

The description of the property is the information that we will be able to find registered in the Property Registry in which the characteristics of the property in question are detailed, such as its physical situation, the data relative to its nature, its boundaries or its surface.

What is the extension of the mortgage guarantee?

By extension of the mortgage guarantee we must understand a set of additional guarantees that the Mortgage Law grants to the creditor of the secured loan, so that, in the event of such cases, the fact that there is a mortgage on the property will also affect those supervening situations that, eventually, increase the value of the property or are susceptible to an additional economic valuation.

What types of mortgage guarantee extensions are available?

Pursuant to articles 109 et seq. and the best doctrine in this regard, there are three main types of extensions of mortgage collateral, namely:

Natural extension of the mortgage: which covers natural accessions, improvements to the real estate or indemnities granted to the owner in respect thereof.
Conventional extension of the mortgage: it covers, only in case of agreement between the parties, the movable objects that are permanently placed on the estate, or their fruits (for example).
Extension of the mortgage against a third party possessor: which limits the guarantee of the mortgage to the movable property found on the property, its fruits or income, when the property has been transferred to a third party.

What is the natural extension of the mortgage guarantee?

The natural extension of the mortgage includes a set of situations in which there are modifications in the state of the property or in the patrimony of its owner, by reason of that same property, which are also affected to the fulfillment of the principal obligation. Thus, we can highlight, among others:

Natural accessions: for example, this can happen with a property adjacent to a river, whose course is modified by natural causes, causing an increase in the surface of the land.
Improvements: that is, new plantings, irrigation or drainage works, works of repair, security, transformation, comfort, saving, elevation of buildings or any other similar works. Thus, if any of these works are produced, and they increase the value of the property, all of them are also liable in case of non-payment of the principal obligation ("so that, for example, the owner could not eliminate these improvements to try to avoid their loss, since they have also been affected by the mortgage).
The indemnities that the owner of the mortgaged property may receive in the event of a loss therein, to guarantee that the property does not lose value and, therefore, does not harm the mortgage guarantee.
Compensation resulting from compulsory expropriation for reasons of public interest

What is the conventional extension of the mortgage guarantee?

The conventional extension of the mortgage guarantee, provided for in Article 111 of the Mortgage Law, establishes that unless otherwise agreed, it does not extend to:

Movable objects placed on the property for purposes of adornment, comfort or exploitation, or for the service of an industrial activity (in the latter case, unless they cannot be removed from the property without causing damage to it).
The fruits, whatever the situation in which they are found ("for example, the harvest of a farm").
Rent due and unpaid at the time of demand for performance of the secured obligation(e.g., months of rent on such property).

Therefore, as mentioned above, in principle, the mortgage guarantee does not extend to all these concepts, but if expressly agreed, this would be possible.

What is the extension of the security interest against the third party possessor?

This legal provision emanating from Article 112 of the Mortgage Law implies that, in the event that the property passes into the hands of a third party owner, the mortgage guarantee will not extend to the personal property permanently placed in the buildings by the third party, nor to the improvements that do not consist of repair, safety or transformation works, provided that all of them have been paid for by the new owner.

"Thus, by way of example, if the new owner of the property were to install in the same a removable swimming pool, if the property were to be executed, the same would remain the property of this third party, since the mortgage guarantee would not extend to it".

See more frequently asked questions

What is the extrajudicial sale of the mortgaged property?

Extrajudicial sale of a mortgaged property is understood to be the procedure by virtue of which, in the event of default on the mortgage loan, the enforcement of the guarantee, that is, the attempt to sell the mortgaged property to obtain the funds necessary to pay off the debt, is not carried out through a judicial proceeding, but through a different sale procedure, which will be carried out before a Notary Public.

When will an out-of-court sale of the mortgaged property be possible?

In the event of non-payment of the loan secured by the real right of mortgage, this procedure may only be used to try to auction the mortgaged property, when this has been expressly agreed in the deed of constitution of the mortgage in question.

On the other hand, if this has not been expressly agreed, the creditor must resort to the corresponding judicial foreclosure proceeding.

What requirements must my mortgage have in order for an out-of-court sale of the mortgaged property to be agreed?

In order for the agreement reached to resort to this extrajudicial sale procedure, in case of default, to be valid, a series of requirements must be met, the most relevant of which are the following:

In the first place, this particularity must be agreed in a stipulation separate from the rest of the deed. With this, the legislator intends to highlight and emphasize the importance of opting for this option so that the debtor is fully aware of it and does not ignore the existence of this agreement when it is "masked" among many other clauses of the contract.
Likewise, this type of procedure may only be agreed upon if, initially, when the mortgage in question was constituted, the obligation guaranteed by the mortgage was expressly determined, as well as its ordinary or default interest, so that the debtor knows, from the outset, the maximum liability for which this property will be liable and which, in the event of non-payment, would be auctioned through this extrajudicial procedure.
In addition, the deed of incorporation must expressly state the appraisal value at which the interested parties appraise the property, so that it may serve as a rate in the auction, taking into account that such value may not be different from the one established in the direct judicial execution procedure (with this stipulation the legislator intends to protect the consumer from possible abusive appraisals, due to insufficient value, which would harm the debtor).
In addition, the address indicated by the mortgagor for the practice of summons and notifications must be stated, as well as the person who, if applicable, must execute the deed of sale on behalf of the mortgagor (the creditor himself may be designated).
Finally, in the event that the mortgage loan is referenced to a variable rate, together with the request for an out-of-court sale, the creditor must attach a reliable document accrediting that the outstanding debt has been settled in the manner agreed by the parties in the mortgage deed of incorporation.

How will the extrajudicial sale of my property proceed?

If there is indeed a non-payment of the secured debt, and this procedure has been agreed in the deed of incorporation, the creditor will send a request to a Notary Public (who must be from the place where the property is located) to initiate this procedure, stating the details of the non-payment, together with the corresponding registered mortgage deed.

Verified the concurrence of all the documentation, the Notary in question will communicate this circumstance to the debtor so that, in a determined term, he pays the existing debt (thus giving him an opportunity to pay what is due and avoid losing his house).

Once the period granted has elapsed without the requirement being complied with, the auction of the property will be held, which will currently be carried out only once, electronically, through the auction portal of the State Agency of the Official State Gazette. In the same, all the bids of the bidders that meet the legally established requirements will be admitted, awarding the auction to the highest bidder (that is, declaring the highest bidder the "winner" of the auction) and, if he pays the amount in question, the property will be awarded, while if there is no bidder, the same will be awarded to the mortgagee for the value that has been set.

As a consumer, if there is an abusive clause in my deed regarding this out-of-court sale procedure, is there anything I can do?

Of course, and in order to avoid abuses that may be exercised by professional creditors over consumer debtors, the law establishes a series of precautions or protections that may protect the consumer in the event that the conditions established for the extrajudicial sale are abusive.

Thus, if the Notary in question considers that any of the clauses of this stipulation is abusive, the law obliges him to inform the debtor, so that the latter may adopt the decisions that best protect his rights. If as a result of this communication, the debtor considers that the clause is abusive and files a legal action in this sense, the procedure of notarial auction will be suspended until the issue is substantiated, firmly, in said legal procedure.

Who is the guarantor?

The guarantor or surety of a mortgage loan is the person who subsidiarily guarantees the fulfillment of the principal obligation, so that if the principal debtor repays the loan in question, it is the guarantor or surety who must pay the installments of the unpaid loan.

Thus, for example, in the classic case of a parent-child surety, the son acquires a house for himself, as principal debtor, so that it is he who must pay the monthly installments on the loan. However, his parents are included in the operation as guarantors, so that if the son is unable to pay (because he has become unemployed, for example) it will be the parents who will have to assume the payment of this debt.

When will it be necessary for the transaction to be guaranteed by a third party?

In general, the need to guarantee a loan transaction with mortgage guarantee will only be necessary when the debtor or debtors present a meager economic capacity in relation to the debt contracted, so that the financial institution, in view of the doubts or misgivings generated by an eventual loss of payment capacity of the debtors, requests the presence of a guarantor as an additional guarantee for the transaction, so that, in the event that this loss of economic capacity actually occurs, which would cause the principal debtor to be unable to repay the debt, The financial institution requests the presence of a guarantor as an additional guarantee for the operation, so that in the event that this loss of economic capacity actually occurs, which would mean that the principal debtor would not be able to repay the debt, there is a third party with sufficient income or assets to guarantee the periodic payment of the debt.

What kind of endorsements are there?

Broadly speaking, we can find total guarantees, which guarantee the totality of the contracted debt and its interests, and also, unlike these, we can also find guarantees for a determined time or amount, so that their liability is limited to an economic figure that is agreed upon or to a specific period of time, so that once this period has elapsed, they would no longer be liable for an eventual non-payment.

What are the risks of endorsement?

The risks of providing a guarantee to a third party are evident, since if the latter does not pay his loan, we will be the ones who will have to do so, when the property of the mortgaged property is not ours, but that of the principal debtor, so that, in short, the guarantor will be paying a mortgage debt on a house that is not his.

Likewise, as the most relevant risk, the guarantor must know that he will be liable for that guaranteed debt with all his assets, so that if he could not pay either, but had goods or assets in his name, the financial entity could attack them, and he could even lose his own home, as has happened on many occasions, generating dramatic situations in which several generations of the same family (children and parents) have all lost the ownership of their home.

Is it convenient to endorse a third party?

The answer to this question must be a resounding "no". The risks of an endorsement operation are very high, as they can put at risk the patrimony of a family, even of several generations of the same. Therefore, it is strongly recommended to flee from this resource and avoid it at all costs, as it can generate very serious and very unpleasant situations for the parties.

What other kind of guarantees can we find?

In addition to the guarantee, there are other possibilities of constituting additional guarantees, such as, for example, the pledging of assets. Thus, if a mortgagor owns stock market assets, he can pledge these shares in favor of the financial institution in the event of default, so that the latter has an additional guarantee for approving and granting the credit operation.

What is a power of attorney?

A power of attorney is a public document in which a person, called the principal, confers on a third party, called the attorney-in-fact, the capacity to represent him/her so that, in his/her name and right, he/she may carry out some legal procedure or business.

What types of powers can we find?

Broadly speaking, we can distinguish the so-called general powers of attorney, which are those in which the principal confers on the attorney-in-fact a power of attorney to carry out any kind of legal act or business on his behalf ("such as buying real estate, mortgaging it, accepting an inheritance, carrying out administrative procedures, filing legal actions, etc."). ). These powers of attorney, which entail an obvious power, since a third party is given the power to perform on our behalf any act with a very high economic transcendence, must be granted very restrictively and only in favor of persons in whom we have absolute confidence.

On the contrary, the so-called special powers of attorney are those in which the bundle of powers is limited to a single act or specific business, so that the attorney-in-fact can only perform on our behalf the specific action detailed in the power of attorney, but nothing more.

What is a proxy clause in a mortgage?

The proxy clause of a mortgage constitutes an agreement by virtue of which the mortgaged debtor confers a power of attorney in favor of the financial entity that grants the loan, so that the latter can, by itself, rectify or correct the corresponding part of our mortgage, in order to obtain the registration of the mortgage in the Property Registry.

What is the purpose of a mortgage proxy clause?

For a real right of mortgage to be validly constituted, it is necessary that it be recorded in the Property Registry, as required by current legislation, and only in this way will the mortgage be protected in the registry against third parties who may wish to attack the property as security for other debts.

Thus, in the notarial and registry practice it can happen that the deed of loan with mortgage guarantee contains small material errors, inaccuracies or inaccurate data that, when noticed by the Registrar of the Property that must register the same, cause a negative qualification of this one, that is to say, a refusal to register this mortgage for precisely containing those inaccuracies or minor stipulations that have generated the impediment.

Therefore, in order to facilitate this process of correction of the error in the deed, a power of attorney is constituted in favor of the creditor entity, so that it, by itself, in the name and on behalf of both parties (that is, debtor and creditor) can grant a deed of rectification or correction to correct these errors and thus obtain the intended registration of the mortgage right in rem.

Is there any limit to the proxy clause in a mortgage?

Of course, this power of attorney is limited to correcting or rectifying material errors that do not have a nuclear transcendence in the contract, but in no case does it enable the financial entity to modify the contract unilaterally, in its favor, affecting fundamental aspects of the contract, such as the amount loaned, the repayment period, the interest rate, etc.

What is insurance?

An insurance contract is a legal business in which one party, called the insurer, undertakes to pay a certain amount of money or benefit in favor of the counterparty, called the insured, in the event of the occurrence of an uncertain event.

"Thus, for example, home damage insurance covers risks that may cause destruction or damage to the home, such as a gas explosion that could lead to the ruin of the property".

Is it mandatory to take out damage insurance when taking out a mortgage?

Indeed, Article 8 of Law 2/1981, of March 25, 1981, regulating the Mortgage Market, establishes that the mortgaged property must be insured against damage for the appraised value.

This ensures that, in the event that the mortgaged property suffers damage, the insurance company will repair it, thus restoring the market value of the collateral, which prevents it from losing value and prevents the financial institution from recovering its debt through the auction of the property in the event of default on the loan, given the loss of value resulting from the damage or impairment.

Likewise, the recent Law 5/2019 of March 15, 2009, regulating real estate credit contracts, establishes the obligation to take out damage insurance when taking out a mortgage on a real estate property.

When I take out a damage insurance policy when I apply for a mortgage, is it mandatory to take it out with the same entity that grants me the loan?

The answer in this case is emphatically no, since this is stipulated in article 17 of Law 5/2019, of March 15, regulating Real Estate Credit contracts.

So, if we wish, it will be possible to contract this damage insurance with the same entity (through its insurance company), but if, on the contrary, we find another insurance company that offers us similar conditions but with a lower premium, the creditor financial entity will be obliged to accept this insurance to the detriment of its own.

Likewise, the financial entity that grants us the loan will not be able to pass on to us any cost for the expenses incurred in studying the policy we choose.

Is it mandatory to take out life insurance when taking out a mortgage?

Strictly speaking, analyzing the current regulations, unlike what happens with damage insurance, it is not compulsory to take out life insurance in order to take out a mortgage.

However, it is no less true that Article 17 of Law 5/2019, of March 15, regulating Real Estate Credit Contracts (applicable when the debtor is a consumer, the creditor is a professional, and the loan is for the acquisition of a residential dwelling) establishes that financial institutions may make the granting of the mortgage loan conditional upon the debtor taking out life insurance. In such a case, the debtor may choose between taking out such insurance with the insurance company of the financial entity itself, or if a better offer is found in another competing insurance company, opt for the same.

In any case, it is considered very convenient to have a life insurance for these occasions, because in case of death of the main debtor, if it is not available, the debt contracted will be transferred to his heirs, who, if they do not have sufficient economic capacity ("as for example can happen if a father of a family with minor children dies"), can be thrown into a very delicate economic situation.

Is it advisable to take out additional insurance?

In addition to the damage insurance and life insurance, there are now insurance companies that insure the temporary payment of the debt in the event that the debtor finds himself in a situation of unemployment.

Thus, if the debtor is able to meet his mortgage payment without any problems, but suddenly loses his job and, having no income, can no longer meet the monthly payment of his loan, in such a case the insurance company would come into play, paying the corresponding installments, up to the amount or time limit agreed in the insurance contract.

This, not being a very common option, may be interesting for people who have a high monthly mortgage loan payment and little equity or savings, so that in a sudden situation of unemployment they may have severe difficulties to meet the payment of their loan installments.

Can a mortgaged property be sold?

Of course, the fact that there is a mortgage on a property does not in any way prevent its owners from selling it. Therefore, if they put the property on the market and find a buyer, there will be no problem in making the sale.

If a mortgaged property is sold, what happens to that debt?

In the event that the mortgaged property is sold, it is normal that, in the same act of the sale, if the buyer has the necessary funds to do so, he delivers a part of the price to the creditor financial entity to liquidate the pre-existing debt guaranteed with that mortgage, with which the property will be freed of charges, and the problem will be solved.

If I cannot pay for my new home in cash and it is already mortgaged, what can I do?

If I want to buy a house, but I do not have the necessary funds to do so, so I must resort to external financing from a financial institution (i.e., a mortgage loan), but the apartment or house I want to buy already has a previous mortgage from the current owner, I have two great options:

The first one can consist of looking for a different financial entity to grant me a loan to pay the purchase price, buy the property in question, in which part of the price will go to the seller and part to the financial entity that granted the loan to the seller, so that the property will be released from the previous mortgage and encumbered with the new mortgage that guarantees this new loan.
Or, if applicable, opt for a mortgage subrogation, that is, negotiate with the seller's current financial institution to acquire the ownership of that loan, so that we will only deliver to the seller the part of the price that differs between the agreed sale price and the existing debt, with the new owner assuming the pre-existing debt from then on.

If as a buyer I subrogate the pre-existing mortgage loan, do the conditions of that loan remain unchanged?

Indeed, in the event of a subrogation of mortgagor, if nothing else is agreed, the conditions of the transaction will remain unchanged, with the only change being that, from now on, the party obliged to pay is no longer the former owner, but the new owners of the property.

If as a buyer I subrogate my pre-existing mortgage loan, can I negotiate new conditions with the financial entity?

Of course, if an agreement is reached between the parties that affects the essential elements of the contract, such as the amount of the loan, the repayment term, the applicable interest rate, etc., there will be no problem in carrying out the subrogation with this change of conditions, but in such case we will be dealing with a subrogation and novation of the mortgage loan, since these two circumstances occur together, that is, the change of the debtor and the modification of the essential conditions of the contract.

What are the assignment of information clauses in a mortgage?

By virtue of the transfer of information clause(s), the debtor consents to the creditor communicating the details of the transaction to a series of databases, as well as, in the event of non-payment, communicating the same to databases of unpaid debts so that third parties may become aware of this situation.

What is the CIRBE?

The Central Credit Register, commonly known as CIRBE, is a Bank of Spain database that collects information on loans, guarantees and other current risks that financial institutions have with their customers.

Thus, when a financial entity formalizes a credit operation, it communicates the same (debtor's data, amount, etc.) to CIRBE so that it can be registered therein. By doing so, if a customer requests a credit operation, any entity can consult this database and know, in a real way, what previous debts that person has with other credit institutions, which will allow it to adequately assess the viability of the operation.

Therefore, this transfer of personal data from banks to CIRBE can only be carried out if the debtor party has consented to it in the corresponding clause on the transfer of information.

What can a financial institution transfer my data for?

Financial institutions can also transfer data on their clients and their transactions to databases specialized in the analysis of credit transactions, in order to build up a data bank with which to analyze the viability of future transactions. In short, at present, with the use of big data techniques, it is possible, by analyzing the behavior of past credit operations, to predict the evolution of future current loan operations, so that this transfer provides the necessary information to those data files with which financial institutions make analysis and study decisions.

What are debt collection files?

In the event of a serious and repeated non-payment of the debtor's obligations, if this has been expressly agreed in the loan contract, the financial institution may communicate the debtor's data to default files ("such as RAI or ASNEF"). Thus, in these cases, the Bank or Savings Bank communicates this default and the debtor's data to the default file, after which they are available to anyone who searches these databases.

Consequently, if the non-payment and the registration in the database of unpaid debts occurs, in the future, when the debtor wants to carry out any new credit operation or contract a service subject to periodic installments that may be subject to non-payment (such as water, electricity, gas, telephone, etc.), these companies, if they carry out a previous search in these files and his name appears, will distrust his payment capacity and will reject the operation or the contracting of the service, with the evident future damage that they generate to that person.

Can I refuse to give this information to third parties?

In principle, this is possible, but it is most likely that, in such a case, the financial institution will refuse to sign the transaction, since the transfer of credit transaction data to these databases is a very useful tool for all banks and savings banks in the management and granting of risks.

What is mortgage enervation?

The enervation of the mortgage is a situation that can occur when the debtor, once the life of the loan has begun, decides to change its operation to another financial entity that offers better conditions. In such a case, the enervation will occur if, after the offer of the other entity, the Bank or Savings Bank that made the initial loan presents a better counteroffer, which prevents the debtor from taking his mortgage to another entity.

If I have decided to change my mortgage to another entity, can the bank that initially granted me the loan prevent me from doing so?

To date, this was indeed possible, so that the initial financial institution improved the offer that the competition was making to its client, had the right to retain it and avoid the subrogation of the mortgagee.

However, a recent legislative amendment operated by Law 5/2019 of March 15, 2009, regulating real estate credit contracts, has completely changed this issue, so that now, in the event that the initial financial institution makes a counteroffer to the debtor, it can be accepted or not voluntarily by the debtor, so that the financial institution has lost the power to unilaterally retain its customer by improving the offer of the competing bank or savings bank.

How is this mortgagee subrogation carried out?

In the event that the rules of Law 5/2019, of 15 March, regulating real estate credit contracts (i.e., entered into between consumer debtors and professional creditors for the acquisition of residential housing) are applicable, if as a debtor I receive an offer from a bank or savings bank other than my current one, in which the conditions of my mortgage loan are improved, if I accept this offer, this bank will notify this circumstance to my current entity so that it is aware of it.

In view of this notification, my current financial institution must deliver, within 7 calendar days, a certificate stating the outstanding debt, so that the new institution knows for sure what is the amount to be subrogated.

Once the certification has been received, during the following 15 calendar days, the current lender may make a counter-offer to its client, which may or may not be accepted voluntarily by the client. During this 15-day period the creditor may not be subrogated.

Thus, once this 15-day period has elapsed without the acceptance of the counteroffer from our current entity, the novation deed may be formalized, in which it will be sufficient for the new financial entity to state that it has paid to the creditor entity the due amount indicated in the certification delivered.

What is a change of creditor fee?

This is the fee that may be charged by the financial entity that initially granted the loan if, a posteriori, we decide to change bank or savings bank and transfer our loan to another entity that offers us better conditions (whether in terms of interest rate, repayment term, capital granted, etc.).

Is it legal for the financial entity to charge me a commission for the change of creditor?

Of course, this is possible and legal, as long as this commission and its possible amounts have been previously agreed in the loan contract, and all the requirements of transparency and non-abusiveness of the contractual clause in question are met, as well as the maximum limits established by law.

What is the maximum amount that the financial institution can currently charge me for a change of creditor fee?

Pursuant to Article 3 of Law 2/1994, in mortgage loan subrogations due to a change of creditor, if the mortgage loan is referenced to a variable rate, the following fees may be charged:

If no commission has been agreed upon, nothing may be charged for this concept.
If a commission of less than 1% has been agreed upon, the same shall be paid.
If a commission of more than 1% has been agreed, only 1% shall be paid, unless the financial entity proves the existence of economic damage, in which case it may also claim this damage.

Notwithstanding the foregoing, it is necessary to take into account that if the subrogation of the creditor implies the substitution of a variable rate for a fixed rate for the remainder of the term of the loan, the legislator has established a special rule, which is as follows:

If the subrogation takes place during the first three years of the life of the loan, the compensation may not exceed the financial loss that the lender may suffer, with a limit of 0.15% of the capital repaid early.
If the subrogation takes place beyond the first three years of the life of the loan, the creditor may not demand any commission.

What is the enervation of the mortgage action?

Unlike the concept of enervation of the mortgage, the enervation of the mortgage action is a very different matter, which will be explained below in order to avoid errors in the interpretation of the clauses of our mortgage.

Thus, by enervation of the mortgage action must be understood that situation foreseen in article 693.3 of Law 1/2000, of Civil Procedure, in which, in the event of non-payment of the loan, and once the foreclosure procedure has been initiated and, therefore, the attempt to auction the property, if, before the closing of the auction, the debtor deposits the amount of the loan, the debtor will be able to pay the amount of the loan, the debtor consigns the exact amount of principal and interest due, the property will be released, that is, the debt will be extinguished and the foreclosure proceedings will be terminated, so that the debtor has a new opportunity to retain ownership of his home.

What is personal data protection?

The protection of individuals in relation to the processing of their personal data is a fundamental right recognized by Article 18 of the Constitution, so that all citizens have the right to the protection of our honor and personal privacy, which is also projected on all our personal data that we provide to any company or professional, when we hire their products or services.

Thus, when we contract a mortgage loan with a financial institution, we provide this multitude of very intimate personal data, such as our ID, address, bank account, data on our income and assets, etc., which, in view of this, obliges these companies to treat such data appropriately to ensure its confidentiality, as well as an appropriate use of the same.

What regulations govern the protection of personal data?

The regulations governing the protection of consumer data, which can be described as very strict, are mainly established in the Organic Law 3/2018 of December 5, 2018, on Personal Data Protection and guarantee of digital rights, as well as its implementing regulations, which establish high administrative penalties in the event of non-compliance or malpractice in the processing of personal customer data.

What does the personal data processing clause in the deed imply?

In the personal data processing clause, the mortgagor freely and voluntarily states that he/she consents to the processing of his/her personal data by the financial institution, so that the latter is authorized to collect, analyze and duly store them in its databases.

Likewise, in this clause, the financial entity complies with the duty of information required by data protection regulations, informing the debtor of how it is going to process his data, what use or destination will be given to them, as well as the identification of the person responsible for processing, that is, the person in charge of ensuring compliance with the law in this matter.

As a consumer, do I have access to my personal data?

Of course, data protection regulations give the customer or user the right to consult the data available to the companies with which he/she has contracted products or services, in order to know them, as well as, if necessary, request their modification or rectification if they are not correct.

Can the financial institution transfer my data to third parties?

Indeed, if this is agreed in the clause that is signed, it is possible to authorize the financial institution to transfer this data to third parties for statistical purposes, research or even for other commercial campaigns.

What is an insolvency proceeding?

An insolvency proceeding is a legal procedure, piloted by a Judge, in which a certain person (whether natural or legal), faced with the impossibility of meeting its obligations (i.e. the impossibility of meeting its debts), resorts to the same to try to reorganize and redirect its financial situation, if possible, so that with a reorganization of the debts its repayment is achieved or, if this is not possible, an orderly liquidation of its assets to ensure that its creditors recover as much of their claims as possible.

Can a natural person also file for bankruptcy?

Indeed, there is currently a legal mechanism, regulated in Law 25/2015, of July 28, on second chance mechanism, which allows indebted persons in an adverse economic situation that prevents them from facing the payment thereof, to avail themselves of a series of mechanisms to try to rearrange that situation and, even, in the best of cases, to obtain a partial exoneration of the pre-existing debts, thus lightening their financial situation.

Who will pilot the insolvency proceedings?

In the event that a judicial phase is reached, of course, a Judge will intervene in the same. However, beyond this figure, in every insolvency proceeding the so-called insolvency administrator will intervene, that is, a professional (lawyer or economist) specialized in debt restructuring, who will advise the debtor and will propose to the Judge the most appropriate measures to try to redirect the insolvency situation.

What mechanisms can lead to the declaration of an insolvency proceeding?

If a person voluntarily declares its insolvency proceedings, this determines the freezing of existing debts and their enforcement procedures, so that individual creditors will not be able to enforce their guarantees separately, but will be subject to the evolution of the insolvency proceedings and the decisions adopted therein.

Thus, in the event that the insolvency proceeding is a suitable instrument to reorganize the debtor's situation, so that an agreement can be approved to guide the orderly repayment of its debts, two mechanisms can be used, broadly speaking, namely:

The so called "quitas", which imply that the debtors forgive or forgive a part of the debt, which means that the installments to be repaid by the debtor are lower, so that the debtor can afford to pay them.
The so-called waiting periods, which imply a postponement of the debt, so that the debtor in bankruptcy, for a period of time (for example 1 or 2 years) does not have to repay the principal of what is owed, thus gaining time to earn more money and thus regain payment capacity to repay its debts.

What are the implications of bankruptcy clauses in the mortgage?

The so-called bankruptcy clauses in the mortgage loan minutes make it possible to limit the effects that an insolvency proceeding of the principal debtor or of a guarantor may have on the liability of third parties bound by the transaction, so that even if one of them enters into insolvency proceedings, and within said proceeding an insolvency agreement is approved in which the obligation of the insolvent party may be reduced (by means of a waiver or a stay), this will not affect the position of the third party guarantor, so that the latter will continue to be personally liable for the entire principal obligation initially contracted.

"Thus, by way of example, in a mortgage of €200,000 with a principal debtor and a guarantor, if the debtor enters into insolvency proceedings and an agreement is approved in which the debt is reduced by half, i.e., €100.000, so that the debtor would only have to pay back 100.000€, this agreement will not affect the guarantor on the basis of this bankruptcy agreement clause, so that the guarantor will be liable for all the 200.000€ initially requested".

Mortgage loan

What is a mortgage loan?

What documentation do I need to go to the notary to sign a mortgage loan?

Lender (Financial Institution)

Borrower (Customer or debtor)

Property (mortgaged property)

How much does it cost to formalize a mortgage loan deed before a notary?

Notary fees

Registration fee

Table (AJD) by community

More frequently asked questions

Financial clauses

General clauses

Related articles

Where can I consult the applicable regulations?

New regulations

Development regulations

General Directorate of Public Faith and Legal Certainty (former DGRN)

General Council of Notaries (CGN)

Association of Registrars

Remaining regulations (partially modified)

Make an appointment

Select date and time and make your appointment online.

Thank you very much!

Thank you very much!