COVID-19 Loans: Moratorium on payment of fees

1. What is the mortgage payment moratorium? 

It is a measure adopted with the aim of alleviating the economic burden of citizens who are temporarily unable to meet their mortgage payments as a result of the COVID-19 health crisis. Under this measure and provided that the requirements are met, a natural person in a situation of economic vulnerability may request the temporary suspension of the contractual obligations arising from certain mortgage loan contracts.

2. Who can benefit from this measure? 

The beneficiaries of the moratorium may be natural persons in a situation of economic vulnerability who are the principal debtor or guarantors of the principal debtor.

3.Which loans are eligible for the moratorium? 

Mortgage loans and credits –existing at the date of entry into force of this measure– for the acquisition of the following may benefit:

a)     primary residence;

b)     properties used for the economic activity carried out by entrepreneurs and professionals; and

c)     housing other than the primary residence in a rental situation and for which the individual mortgagor, owner and lessor of that housing has ceased to receive rental income since the entry into force of the state of emergency or stops receiving it up to one month after the end of the state of emergency.

4. What requirements must be met by potential beneficiaries who wish to apply for the moratorium on mortgage loans for the purchase of their primary residence or of property used for economic activity? 

To apply for the moratorium, the potential beneficiary must be in a situation of economic vulnerability as a result of the health crisis caused by COVID-19. To this end, all of the following conditions must be met:  

1. The potential beneficiary becomes unemployed or, in the case of an entrepreneur or professional, suffers a substantial loss of turnover of at least 40%.

2. The total income of the members of the family unit, in the month prior to the application for the moratorium, does not exceed:

» In general, the limit of three times the monthly Multipurpose Public Indicator of Income (IPREM).[1]

» Exceptional cases:

i. The limit of four times the IPREM when one of the members of the family unit has a declared disability of more than 33%, a situation of dependency or an illness that can be proven to make him/her permanently unable to work.

ii. The limit of five times the IPREM when the mortgagor is a person with cerebral palsy, a mental illness or an intellectual disability, with a degree of recognised disability equal to or greater than 33%, or a person with a physical or sensory disability, with a degree of recognised disability equal to or greater than 65%, as well as in cases of serious illness that can be proven to make the person or his/her carer unable to carry out an activity.

The above-mentioned limits shall be increased by 0.1 times the IPREM for each dependent child in the family unit (0.15 times the IPREM in the case of a single-parent household) or for each member of the family unit over the age of 65. 

3. The total of the mortgage loans instalments that may benefit from the mortgage moratorium,[2] plus basic expenses and utilities, is greater than or equal to 35% of the net income received by the members of the family unit taken as a whole.

4. As a result of the health emergency, the family unit has suffered a significant alteration in its economic circumstances in terms of the effort required to access housing, which occurs when the effort represented by the total mortgage burden, taken to be the sum of the mortgage payments on the property referred to in question 2 of this document, has been multiplied by at least 1.3.

The same conditions are required to access the moratorium on payments of non-mortgage loans and credit.

5. What is meant by "entrepreneur or professional" for these purposes? 

Natural persons who meet the conditions set out in Article 5 of Law 37/1992 of 28 December 1992 on Value Added Tax.

6 What is considered a "family unit"? 

For the purposes of this measure, a "family unit" will be deemed to be composed of the debtor, his/her spouse not legally separated or registered domestic partner and children, regardless of their age, who live in the dwelling, including those linked by a relationship of guardianship, care or foster care, and their spouses not legally separated or registered domestic partners, who live in the dwelling.

7. What are "basic expenses and utilities"? 

The amount of the cost of electricity, gas, heating oil, running water, fixed and mobile telecommunications services and contributions to the owners' association. Only those provided in the primary residence of the family unit will be deemed "basic expenses and utilities".

8. What documentation must be provided by those wishing to apply for the moratorium on mortgage loans for the purchase of their primary residence or of property used for economic activity?  

1. This is an automatic measure. In general (see question 13), there is no need for an agreement between the parties or for the loan contract to be amended. If the requirements set out in the legislation are met, the lending institution has to apply the moratorium whenever the beneficiary requests it.

To this end, potential beneficiaries must submit to the lending institution a request for a moratorium (suspension) on the payment of the mortgage loan for the acquisition of their primary residence or of property used for the economic activity carried out by entrepreneurs or professionals, accompanied by the following documentation accrediting the situation of economic vulnerability:  

a)     If the beneficiary is legally unemployed: certificate issued by the body managing the benefits, stating the monthly amount received as unemployment benefits or subsidies. 

b)     If the beneficiary is in a situation of cessation of activity of self-employed persons: certificate issued by the State Tax Agency or the competent body of the regional government, as appropriate, on the basis of the declaration of cessation of activity declared by the person concerned. 

c)     To prove the number of persons living in the dwelling: 

                      i.        Family book or document certifying a domestic partnership.

                     ii.        Municipal certificate of registration of the persons registered in the dwelling referring to the date of the submission of the supporting documents and to the previous six months.

                    iii.        Declaration of disability, dependency or permanent inability to work. 

d)     To prove the ownership of the assets: 

              i.        Uncertified extract from the Land Registry indexing service about all members of the family unit.

             ii.        Deeds of sale of the primary residence, the rented housing or the property used for economic activity and of the granting of the mortgage loan or loans. 

e)     If the moratorium is requested for a mortgage loan for the acquisition of housing other than the primary residence in a rental situation, the lease agreement must be provided. 

f)      Signed declaration by the debtor(s) regarding the fulfilment of the requirements to be considered as having insufficient economic resources. 

2. If the applicant is unable to provide any of the documents required in points (a) to (e), those documents may be replaced by a signed declaration including express justification of the reasons –related to the situation arising from the health crisis– why he/she is unable to do so. The documentation not provided must be submitted within one month following the end of the state of emergency and its extensions.

9. When and how can you apply? 

It can be requested from the lending institution from 19 March 2020 (date the measure came into effect) until fifteen days after the expiry of the aforementioned Royal Decree-Law.

10. How soon does my bank have to implement the measure? 

Once the request for the moratorium has been made, the lending institution will implement it within a maximum period of 15 days, provided that compliance with the requirements has been proven.

11. What does the moratorium entail? 

It entails the suspension of the mortgage debt so that the lender will not be able to demand full or partial payment of the mortgage instalment or of any of the items included in it (repayment of capital or payment of interest). The amounts that would be payable by the debtor if the moratorium were not applied will not be deemed due. 

During the term of the moratorium, the early termination clause in the contract will not be applicable and ordinary or late-payment interest will not be applied. 

The moratorium has the effect of extending the duration of the loan by the number of months that the suspension lasts.

12.How long am I entitled to a moratorium on my loan payments? 

The suspension will be for three months, but it may be extended by resolution of the Council of Ministers.

13. Is it necessary to formalise the suspension? 

Although the suspension takes effect without the need for any agreement by the parties, when the state of emergency ends it must be formalised in a public deed and registered in the Land Registry. 

The formalisation and registration fees are paid by the lender.

14. If I request the moratorium, can I reach an agreement with the institution to modify other terms of the contract? 

Yes. In these cases, if the lending institution and the beneficiary of the moratorium agree to modify other parts of the contract, the novation agreement must include: 

(i)             the new terms agreed by the parties;

(ii)            the suspension of the contractual obligations under the moratorium requested by the debtor;

(iii)           the agreement not to accrue interest for the duration of the suspension. 

The formalisation and registration fees are paid by the lender.

15. What happens if I am guarantor for the principal debtor? 

These same measures will apply to the guarantors of principal debtors, with respect to their primary residence and under the same conditions as established for mortgage debtors. 

Non-debtor guarantors and mortgagees in situations of economic vulnerability may require the institution to exhaust the principal debtor's assets before claiming the guaranteed debt from them, even if they have expressly waived the benefit of discussion in the contract.

16. Are there any tax exemptions? 

Yes. The Royal Decree-Law establishes that the deeds of formalisation of mortgage loan and credit novations that occur under the mortgage moratorium will be exempt from the progressive stamp tax on notarial deeds, provided that they refer to the moratorium of mortgage debt for the acquisition of a primary residence.

17. What happens if I benefit from the moratorium without meeting the requirements? 

The debtor will have to compensate the lending institution for the damage and loss incurred and the expenses generated (which will be at least equal to the benefit unduly obtained by the former) provided that: 

(i)               he/she benefits from the moratorium without meeting the requirements; or 

(ii)                          he/she seeks to place him/herself or remain, voluntarily and deliberately, in a situation of economic vulnerability in order to apply for this moratorium.

1. What does the non-mortgage loan moratorium entail? 

It is a measure adopted with the aim of alleviating the economic burden on citizens who are temporarily unable to meet their financial obligations as a result of the COVID-19 health crisis. Under this measure, natural persons in a situation of economic vulnerability may request the temporary suspension of contractual obligations (for example, payment of the regular instalment) arising from all their non-mortgage loans or credit.

2. Who can benefit from this measure? 

The beneficiaries of the moratorium may be natural persons in a situation of economic vulnerability who are the principal debtor or guarantor of the principal debtor.

3. What types of credit are included in the moratorium? 

All non-mortgage loans and credit, including consumer credit, existing on the date of entry into force of this measure (2 April 2020).

4. What requirements must be met by anyone wishing to apply for the moratorium? 

To apply for the moratorium, the potential beneficiaries must be in a situation of economic vulnerability as a result of the health crisis caused by COVID-19. To this end, all of the following conditions must be met:  

1. The potential beneficiary becomes unemployed or, in the case of an entrepreneur or professional, suffers a substantial loss of income or a substantial drop in turnover of at least 40%. 

2. That the total income of the members of the family unit, in the month prior to the application for the moratorium, does not exceed: 

»   In general: the limit of three times the monthly Multipurpose Public Indicator of Income (IPREM).[1] 

»   Exceptional cases:  

• The limit of four times the IPREM when one of the members of the family unit has a declared disability of more than 33%, a situation of dependency or an illness that can be proven to make him/her permanently unable to work. 
• The limit of five times the IPREM when the debtor is a person with cerebral palsy, a mental illness or an intellectual disability, with a degree of recognised disability equal to or greater than 33%, or a person with a physical or sensory disability, with a degree of recognised disability equal to or greater than 65%, as well as in cases of serious illness that can be proven to make the person or his/her carer unable to carry out an activity. 

The above-mentioned limits shall be increased by 0.1 times the IPREM for each dependent child in the family unit (0.15 times the IPREM in the case of a single-parent household) or for each member of the family unit over the age of 65. 

3. The total of the instalments of the mortgage loans that may benefit from the mortgage moratorium,[2] plus the amount of basic expenses and utilities, is greater than or equal to 35% of the net income received by the members of the family unit taken as a whole. 

4. As a result of the health emergency, the family unit has suffered a significant alteration in its economic circumstances in terms of the effort required to access housing, such that the effort represented by the total mortgage burden (sum of the mortgage loan instalments that can be subject to moratorium) on the family income has been multiplied by at least 1.3. 

The same conditions are required to access the moratorium on the payment of instalments of mortgage loans guaranteed by, or arranged for the acquisition of, the primary residence or property used for the economic activity of entrepreneurs and professionals in a situation of economic vulnerability. 

In order to assess whether the borrower may be the beneficiary of a moratorium on its non-mortgage credit and loans, the following circumstances will also be taken into account when performing the calculation provided for in paragraphs 3 and 4 above: 

a)    If the potential beneficiary is also the beneficiary of the mortgage moratorium, the application of the latter will not be taken into account for the purpose of the calculation. 

b)    If the potential beneficiary has not arranged a mortgage loan, the total sum of the amounts of any regular payments he/she has to make, derived from the rental income of his/her primary residence (even if it is subject to moratorium) and/or the instalments of any type of non-mortgage financing from a financial institution, will be taken into account for the purpose of the calculation. The amount of the regular non-mortgage financing instalments will be accredited through the submission of the corresponding contract entered into with the lending financial institution.

5. What is meant by "entrepreneur or professional"? 

Natural persons meeting the conditions established in Article 5 of Law 37/1992 of 28 December 1992 on Value Added Tax will be deemed entrepreneurs and professionals entitled to benefit from this measure.

6. What is considered a "family unit"? 

For the purposes of this measure, a "family unit" will be deemed to be composed of the debtor, his/her spouse not legally separated or registered domestic partner and children, regardless of their age, who live in the dwelling, including those linked by a relationship of guardianship, care or foster care, and their spouses not legally separated or registered domestic partners, who live in the dwelling.

7. What are "basic expenses and utilities"? 

The amount of the cost of electricity, gas, heating oil, running water, fixed and mobile telecommunications services and contributions to the owners' association. Only those provided in the primary residence of the family unit will be considered "basic expenses and utilities".

8. What documentation must be provided? 

This is an automatic measure. In general (see question 12), there is no need for an agreement between the parties or for the loan contract to be amended. If the requirements set out in the legislation are met, the lending institution has to apply the moratorium whenever the beneficiary requests it. 

To this end, potential beneficiaries must submit to the lending institution a request for the suspension of the obligations arising from their non-mortgage loan contracts, accompanied by the following documentation accrediting the situation of economic vulnerability: 

a) If the beneficiary is legally unemployed: certificate issued by the body managing the benefits, stating the monthly amount received as unemployment benefits or subsidies. 

b) If the beneficiary is in a situation of cessation of activity of self-employed persons: certificate issued by the State Tax Agency or the competent body of the regional government, as appropriate, on the basis of the declaration of cessation of activity declared by the person concerned. 

c) To prove the number of persons living in the dwelling: 

i. Family book or document certifying a domestic partnership.

ii. Municipal registration certificate of the persons registered in the dwelling referring to the date of the submission of the supporting documents and to the previous six months.

iii. Declaration of disability, dependency or permanent inability to work. 

d) To prove the ownership of the assets: 

i. Uncertified extract from the Land Registry indexing service for all members of the family unit.

ii. Deeds of sale of the primary residence, the rented housing or the property used for economic activity and of the granting of the mortgage loan or loans in the event that a moratorium on the mortgage debt is requested. 

e) In the event of a request for a moratorium on the mortgage debt of a mortgage loan secured by a rental property, the corresponding rental contract will be provided. 

f) A signed declaration by the debtor or debtors that they meet the requirements to be deemed to have insufficient financial resources. 

2. If the applicant for the moratorium is unable to provide any of the documents required in points (a) to (e), those documents may be replaced by a signed declaration including express justification of the reasons –related to the situation arising from the health crisis– why he/she is unable to do so. The documentation not provided must be submitted within one month following the end of the state of emergency and its extensions.

9. When and how can you apply? 

It can be requested from 2 April 2020 (date the measure came into effect) and up to one month after the end of the state of emergency established in Royal Decree 463/2020 of 14 March 2020. 

The application, accompanied by the required documentation, may be submitted to the lending institution by any means that provides evidence of its receipt.

10. How soon does my bank have to implement the measure? 

Once the request for suspension has been made, and provided that the beneficiary's situation of economic vulnerability has been accredited, the lending institution will proceed to the automatic application of the moratorium.

11. What does the moratorium entail? 

During the term of the suspension: 

• The lender may not demand payment of the instalment or of any of the items included in it (repayment of capital or payment of interest). 
• No interest (ordinary or late-payment) will accrue. 

In addition, the maturity date agreed in the contract will be extended by the duration of the suspension (in some cases, it may be necessary to register this extension – see question 12).

12. When will the moratorium take effect? 

The moratorium will take effect from the date of the application. 

In some cases, it may be necessary to formalise the suspension in a public deed (for example, when the credit or loan is secured by a registrable right other than a mortgage or is registered in the Registry of Deferred Sales of Movable Property[3]). In this case, the corresponding deeds will be formalised once the state of emergency has ended and freedom of movement has been fully re-established, but the moratorium will also be applied automatically from the date of the application.

13. How long am I entitled to a moratorium on my loan payments? 

The suspension will be for three months, but it may be extended by resolution of the Council of Ministers.

14. If I request the moratorium, can I reach an agreement with the institution to modify the terms of the contract? 

Yes. In these cases, if the lender and the beneficiary of the moratorium agree to modify other parts of the contract, the novation agreement must include: 

(i)             the new terms agreed by the parties;

(ii)            the suspension of contractual obligations under the moratorium requested by the debtor;

(iii)           the agreement not to accrue interest for the duration of the suspension.

15.What if I am a guarantor for the principal debtor? 

These measures will also apply to the principal debtor's guarantors in the situations of economic vulnerability provided for in the regulation. In addition, guarantors benefiting from the moratorium may require the lender to exhaust the principal debtor’s assets before claiming the guaranteed debt from them, even if they have expressly waived the benefit of discussion in the contract.

16. What happens if I benefit from the moratorium without meeting the requirements? 

The debtor will have to compensate the lending institution for the damage and loss incurred (which will be at least equal to the benefit unduly obtained by the former) provided that: 

(i)               he/she benefits from the moratorium without meeting the requirements; or

(ii)                          he/she seeks to place him/herself or to remain, voluntarily and deliberately, in a situation of economic vulnerability in order to apply for this moratorium.