Costa del Sol's Property Specialists

New Rules on Mortgages in Europe

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Mortgages in Europe

The European Parliament has outlined new rules on property mortgages to help increase the protection of each entity, prior to the mortgage approval. Also, the “payment in kind” has been identified in the new rules and according to Mr. Antolín Sánchez Presedo, “the proposed new rules are a major change and is the first European mortgage directive”.

Mr. Sánchez Presedo goes onto to say that the first European mortgage directive introduces a list of guarantees that “will have to be incorporated under Spanish law because they are not now”.  Under this new directive, a property buyer has a mandatory cooling-off period of seven days before signing a mortgage or contract and now a further seven days to withdraw after signing.

With added protection in place, potential buyers may be tempted to search the Spanish property market once more, but with a slight increase in property demand the fact still remains on how banks and financial institutions will approve applications according to their new strict lending criteria’s.

Payment in Kind

In the past, payments in kind have been a grey area but the new ruling now will prohibit the possibility for all parties to exclude agreed payments in advance as well as payments that have not had a prior agreement.

Furthermore, the new rule states that each party must have a “reasonable degree of tolerance” and that certain charges are limited to protect consumers and prevent long-term debt or court battles.

The payment in kind rule goes onto say that a flexibility in payment  is guaranteed, meaning that there is no possibility of enforcing penalties on the consumer if they want to repay the loan earlier than what was agreed in the signed contract.

As with the buy a property anywhere in the world, it is essential that all legal and economic aspects of the purchasing process are checked to avoid any future pitfalls, but with new directives in place, consumers in the Spanish property market can start to feel protected.