Limits on the purchase price of the home
In order for the Code of Good Practice to apply, not only does the borrower need to satisfy the above-mentioned conditions, but the purchase price of the home must be within certain limits.
To calculate the limit on the price of the home the following must be taken into account:
- The purchase price of the home, which will be the amount paid to the seller not including VAT or any other tax levied on the house purchase.
- The size of the property, which refers to the square metres built.
- The average price per square metre for unsubsidised housing shown by the Housing Price Index produced by the Ministry of Development for the year of purchase of the property and the province in which the property is located. Bear in mind that:
- As the average price is annual and the table shows quarterly average prices, an arithmetic mean will have to be calculated with the quarterly prices corresponding to the year in which the home was purchased.
- The values must be those of the province in which the home is located, not those of the municipality or the corresponding Autonomous Community.
The limit is different depending on which measure of the Code is applied; a less-strict limit for debt restructuring and reduction, and a stricter limit for dation in payment.
In the case of debt restructuring and reduction: the limit is met if the purchase price (PP) does not exceed 20% of the value resulting from multiplying the square metres built (m2) by the average price per square metre for unsubsidised housing shown in the Housing Price Index prepared by the Ministry of Development for the year in which the property is purchased and the province in which the property is located (HPI).
PP ≤ 1.20 * m2 * HPI, with a maximum of €300,000.
In the case of dation in payment, the 20% excess is eliminated.
PP ≤ m2 * HPI, with a maximum limit of €250,000.
In both cases, properties acquired before 1995 will use the average reference price for 1995.
The González family bought a home of 82 useable m2 and 93 built m2 on 3 March 2002 in Alcorcón (Madrid) for a price of €170,000 excluding VAT. Given their payment difficulties, they have asked the bank to restructure their debt.
To check whether it meets the limit with respect to the price of the home:
In point 1 of the table published by the Ministry of Development, "1. Appraised value of unsubsidised housing", we look for the data for 2002 (year of purchase) and Madrid (province in which the home is located) and, with the data obtained, we calculate the arithmetic mean. In our example:
HPI = (1,612.3 + 1,683 + 1,727.5 + 1,868.8) / 4 = 1,722.9
In the case of debt restructuring and reduction, we find that the formula is verified:
PP ≤ 1.20 * m2 * HPI, as 170,000 is less than 192,275.64 (1.20 * 93 * 1,722.9) and, therefore, the limit is complied with.
In the case of dation in payment, we find that the formula is not verified:
PP ≤ m2 * HPI, as 170,000 is greater than 160,229.7 (93 * 1,722.9) and, therefore, dation in payment is not possible.
For more information, see the enquiries on house prices (176 KB) published in the Control Committee's compendium.
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