On June 16, 2019, the new Real Estate Credit Law known as the Mortgage Law came into force. It is important to emphasize and emphasize that the habitual and abusive practices and that they diminished or diminished the rights in the hiring of Insurance linked to the mortgage are limited. From now on it will be the one that has applied for the mortgage Who will be able to freely decide and choose the Insurances according to market conditions, the financial entity not being able to modify the loan conditions in any way. This will give the mortgaged the freedom and footing to contract the Insurance in the best market conditions with the Insurance Agents and brokers of the Insurers entity, without having to opt under pressure or coerced yes or yes, to the Insurance offered by the financial institution that grants the loan.
Promotion and improvement of competition in the Insurance market
The new Law 5/2019 includes in its text the acceptance of the financial institution of an alternative policy presented by the client, without any form involving a worsening of the conditions of the loan, and makes it clear and prohibits the entity from charging an additional expense by the comparative study of alternative insurance.
From the point of view of Euroteide Seguros (Insurance Advisors and Mediators) This law improves and stimulates competition in the Insurance market, leaving once and for all that the Banking does not have a privateer license as Banking Insurance, and competes on equal terms with the mediation and Insurance Brokers sector. When competition improves and is regulated, this improvement translates into an improvement in insurance coverage and premiums linked to mortgage loans.
Apart from these improvements so that you can freely choose all the themes related to Insurance, There are others that affect the spirit of the Law that I will summarize briefly so as not to get too tired, believing that it is interesting to know them since a mortgage loan with total security will be the most important credit that we will acquire throughout our lives.
Within the articles, the Law covers its nature and legal regime to all natural persons, regardless of whether or not they are consumers, in other words, expands the scope of protection to groups such as self-employed workers. Specifically, the Law makes us feel good rules for the protection of natural persons who are debtors, guarantors or guarantors of loans that are guaranteed by a mortgage or other real guarantee right on real estate for residential use.
This Law affects and regulates both financial entities and private lenders and real estate credit intermediaries who carry out the activity in a professional manner, and regulates everything related to real estate credit contracts that establish loans and credits on real estate for residential use. It is significant to highlight that a mortgage contract to acquire an industrial warehouse does not fall within its scope, for example. However, it does contemplate the Law as property for residential use those elements such as storage rooms, garages and any others that, without constituting housing as such, fulfill a domestic function.
This Law also applies to contracts that grant loans for the purpose of acquiring or retaining property rights over land or real estate built or to be built, in this case, provided that the borrower, guarantor or guarantor is a consumer.
The regulation of the pre-contractual phase.
The law is endowed with a detailed regulation of the pre-contractual phase so that the person who enters into the loan contract can make a well-founded decision about its convenience, not suggestively misinformed. In addition, the Law establishes the obligation of lenders to evaluate the solvency of the potential borrower, guarantor or guarantor, before formalizing the loan contract, identifying elements such as employment status, present income, and those expected during the life of the loan, property assets, savings, etc. The latter aspect is of vital importance so that the excesses committed by savings banks and some other banks in the past do not repeat themselves, giving this type of credit in style without the analysis required by this type of operations, and that it has led us that the banks owe the public treasury for their rescue 60.000 million Euros, debt uncollected today and with the intention of never being repaid. With the new Law, this obligation to assess the creditworthiness of the borrower applies to any lender and not exclusively to credit institutions as previously done. It is important to note that it provides that the customer must have the contract a minimum of ten days before signing and, in addition, The notary must resolve all the doubts that arise, as well as check that there are no abusive clauses and above all make sure, verify or ratify that the client understands what he is hiring.
Measures on transparency and legal protection of users.
The Law also implements other important measures. Among them, it regulates the basic information that must appear in the advertising of the mortgage loans, the possibility that the borrower may, at any time prior to the expiration of the term, fully or partially repay the amount owed, and that the default interest will be the remunerative interest plus three percentage points throughout the period in which it is due. In this way, interest on late payment and early amortization is reduced, as well as the months of non-payment required for a loan to be executed. An important premise in which the protectionist nature of the norm is materialized is the express distinction between the expenses that will correspond to the lender and those that will correspond to the borrower.
Finally and once and for all, the Law eliminates floor clauses, since they are prohibited in new contracts, I could not put or set a limit below which the client cannot benefit from the interest rate reductions . Similarly, it contemplates that the lender should not pay if the remunerative interest rate values are negative.
In summary, the new Law implements a series of open-ended measures that make it possible to offer greater transparency and legal protection to mortgage loan signatories in the context of pre-contractual and contractual information.
In Euroteide Seguros (Insurance Advisors and Mediators) We are a specialist in Life and Home Insurance linked to mortgage loans. If you are thinking of contracting a mortgage, remember the new legislative regulations that give you the option to look at the best alternatives of current Insurance and not limit yourself to the offer of the bank or financial entity. Since Euroteide SegurosWe are at your disposal for all the information, projects, offers and quotes you need for Insurance linked to a mortgage.