10 Common Abusive Clauses in Spanish Mortgage Loans

This is the discussion thread for the article 10 Common Abusive Clauses in Spanish Mortgage Loans

Excellent article!
I only wish people were far more familiar with such clauses. Currently all clients seem to be interested in is what the headline rate is.
As such many see no reason to pay for professional advice when it comes to taking a mortgage in Spain.
Agents involved often dont help. Here in Tenerife clients are usually dragged into the nearest bank and lumbered with any old product and told it is fantastic.

Only now, during such tumultuous times are many of these clauses enacted by banks and the borrowers have little or no idea why they ares still paying 6% when rates are historically low.

I am currently dealing with a few cases where a client wishes to remortgage/switch lender bu their current lender has added on upfront life insurance (to the tune of 20,000€ plus).
The bank wont cancel the insurance and insists it has to be kept even if the client switches lender.
Unfortunately since it is added to the loan upfront it will incur interest at prevailing rates for the full term of the mortgage (35 years in one case) more than doubling its actual cost!!!

Thank you for your kind words.

I believe mortgage borrowers should always hire a professional, such as an experienced mortgage broker or a lawyer, to help them avoid costly mistakes.

It will be money well invested.

Regards,
Raymundo LarraÃ*n Nesbitt

We have finally successfully swapped mortgage lenders from an annually reviewed rate with a "Caja" to a Monthly Euribor with an Ex Pat Bank.

Having been tied into insurance contracts with the previous bank, they were and still are listed as the beneficiaries. They say that these cannot, according to the "Ley" be closed until October. I fixed that for them - I canceled the DD.

This same bank, is now holding back 500 Euros, stating that there is another "Ley" about Quartely Liquidation Charges on cheques.

I think they make it up as they go along.

if i buy a property in spain do i take on the debts of the previous owner

Dear Sir,

Yes you do.

On community of owners debts, you are liable for debts dating back 2 years:

Comunidad de Propietarios: Avoid Problems with Your Neighbours in Spain - 26 Jun 2009

On buying a resale in a community, the new owner will be held liable for the prior owner’s communities’ debts for the current year of transfer of ownership as well as the natural year immediately precedent (art 9 e). The property itself will be burdened with a lien for unpaid communal debts.

Which is why under law, the signing of the deed of transfer of ownership requires a Communities’ certificate stating that communal fees are up-to-date for that unit, signed by the communities’ administrator. The purchaser can however waive this requirement voluntarily.

You will also be liable for IBI tax, garbage collection, mortgages, charges etc...

The lawyer you appoint to act on your behalf will make sure you complete with no outstanding liens, charges, encumbrances and community debts.

I have found that when I agreed a new fixed rate of 4.7% over 3 years with the bank of andalusia. I recived a debit on my bank account of 2,551€ for adjust of euribor this is after I paid 6.5% in 2009.
When I asked the bank what this was I was told I had BET on the euribor rate. This year I will pay 4% intrest and because the euribor is now at 1.2% in December of this year I will recive a bill for 24,400€ because the euribor has gone so low. The bank has made it quite clear that I was gamling. I thought I was dealing with a bank not a casino with my morgage.

Dear Mr Cobb,

You probably hired a Swap to offest the risks of interest rate fluctuations (in this case, Euribor).

This is a complex financial tool devised to act as an insurance should the Euribor climb/decrease too sharply.

The problem with it is that it´s a two-way street. If the Euribor rises steeply you are paid a premium by the insurance company, but if the Euribor rate decreases significantly ( such as now havibng reached a historicasl low) it is you who owes money to the bank.

I was very tempted to include swaps as abusive clauses but at the end I ruled them out.

There are thousands of unsatisfied customers who are now facing huge amounts on having hired these insurances. Many have sued their lenders. There are rulings going both ways. Some label them as abusive and other rulings are in favour of lenders (the most recent ones).

The problem lies in that customers, such as yourself, were perhaps not explained or disclosed fully what they were hiring, particularly what would happen if the Euribor fell dramatically. Swaps are a complex financial insurance that can act as a double-edged sword. When you hire them, you are indeed taking an educated guess or gamble on where the interest rate will be heading next.

Yours faithfully,
Raymundo LarraÃ*n Nesbitt

We have a Floor rate of 5.5% which the Bank (Banco Popular says is not changeable. We negotiated an interest only period of 2 years but then find the bank charging us for Land registry fees of 250 euros though we can do the registration ourselves the Banco Popular say its Mandatory as is their Life ins, Their Home ins. and then another 105 euros to do with the registring of a 50,000 loan against a house worth still in excess of 350,000 Small Print is bad Small print in Spanish is impossible

Dear Madam,

As explained in my last article, Advice to Struggling Mortgage Borrowers in Spain – 3rd February 2010, one of the solutions I propose is simply to swap lenders to waive bothersome collar clauses.

For example you have Banesto bank which is marketing really aggressively their mortgage "hipoteca smash". They offer to pay for ALL transfer expenses to switch over to them, including Notary, Land registry fees, cancellation commission of your lender, gestorÃ*a, surveyor etc.

https://www.banestopromociones.com/h...h/?idm=53-ud8i

You also have La Caixa bank offering an equally aggressive product "hipoteca rompe suelos" (collar clause breaker):

http://www.euribor.us/hipoteca_rompesuelo_la_caixa.php

Let us know if we can assist you changing your mortgage to another lender or else renegotiating your mortgage terms and conditions and formalising it at a Notary public in a deed (called "novación" in Spanish).

Yours sincerely,
Raymundo LarraÃ*n Nesbitt

Dear Sirs,

I live in Spain and have a mortgage, I have a life insurance policy which was taken out at the same time as the mortgage. Do I have to have this life insurance? I live in an apartment and I pay community charges every year which includes building insurance. Again, at the same time as I took out a mortgage, I have been paying a building insurance. Should I be paying this?
Your help in this matter would be appreciated. Thank you
Pierina Short

Dear Pierina,

Thank you for your email.

We would need to review the mortgage documentation but it is likely that you are able to cancel this life insurance policy as it was not a legal requisite but just a a commercial condition that your bank insisted upon at the time they were considering your mortgage application.

I would therefore approach your bank and insist that you want to cancel the policy. Make sure they inform you in advance of what are the costs involved for the cancellation. Should you still be in need of instructing a Solicitor, please do not hesitate to drop us a line at info @ lawbird.com

Kind regards,

Interesting article but I am having problems following your references. The link to Law 7/98 LCGC is broken. It would also help if you gave the full meaning of LCGC (in Spanish) so the reader can google it.

With kind regards.

The link has now been fixed. Thanks for letting us know.