Mortgages

This is the share of your net monthly income you can use to service your debts (i.e. pay capital and interest) without undermining your and your family’s ability to meet other financial commitments. It should not exceed 40%.

Note that the 40% limit is the recommended maximum level of total debt, and also includes payments for any other debts you may have, such as a car loan or student loan, together with hire purchase and credit card payments.

In other words, households should have a least 60% of their net monthly income available to pay for food and clothing, bills, and with a little planning, leave something left over to save each month.

Taking out a mortgage involves paying certain expenses including notary fees, registration fees, agent’s fees, taxes and the cost of the valuation. In many cases these charges are passed on to the consumer taking out the mortgage.

In terms of the legal situation, the Spanish Supreme Court’s Judgment of 23 December 2015 (No. 705/2015) of declared a lender’s contractual clause passing on all the taxes and costs involved in setting up a mortgage to the customer to be null and void on the grounds that it was unfair.

Good banking practice dictates that mortgage lenders should study complaints received from customers in the light of the Spanish Supreme Court’s judgment.

Law 2/2011 on the sustainable economy (in Spanish), and the subsequent Law 16/2011 on credit agreements for consumers (in Spanish) contain several provisions for both the protection of customers and financial institutions in relation to requesting and granting financing, respectively.

Financial institutions must act impartially and take customers’ personal and financial situation into account. They must have methods and procedures for advising on, assessing and granting financing and a product marketing policy adapted to the needs of each specific case.

When you have several debts from different products in one bank, when a deposit is made, smaller debts are often serviced first and the mortgage instalment is charged afterwards if the remaining balance is sufficient to cover it.

If you want to avoid this situation, tell your bank which specific debt you wish to cover with the money deposited (this is what we call payment allocation). Do so in writing, so you have evidence of having placed the order if the bank does not carry it out.

This will depend on when your loan agreement was signed.

If you took out your mortgage before April 29^th 2012 (when Ministerial Order EHA/2899/2011 came into force) you should not have to pay any account maintenance and transaction fees if the bank required you to open the account  and it is used solely to service the mortgage loan.

However, if your mortgage loan was arranged after April 29^th 2012, the Ministerial Order establishes that fees may be charged, even if the account is used exclusively to service the mortgage loan, but only under the following circumstances:

• It appears on the FIPRE and FIPER pre-contractual information documents.
• You were informed in advance about the requirement to open an account associated with the mortgage loan.
• You were informed of the share of the total cost of the transaction corresponding to account maintenance.
• The requirement to open the account and its cost are stated in the terms and conditions and this cost cannot be changed unilaterally by the lender over the duration of the loan.

Since Law 44/2002 of 22 November on Financial System Reform Measures (in Spanish) came into force, variable rates on mortgages can be rounded up or down to the nearest eighth of a percentage point, at most, provided that this has been agreed previously.