This week, The government and the banks have finally reached an agreement after several meetings since September of this year.

The new measures will help more than 700,000 families with their mortgage payments after the recent increases in the Euribor.

Do you want to know how this help from the government to pay the mortgage works?

 

couple applying for mortgage

 

It will be through a mechanism added to the existing one Code of Good Practices (in force since 2013), applied voluntarily by the banking sector, although the application of this code is supervised by a control commission.

This means that when you apply at your branch for this help, it will be the bank who has the last word on whether to grant it or not.

 

 

What are the requirements to qualify?

These are the requirements to apply for government help to pay the mortgage:

  • Your family unit must not exceed 29,400 euros of annual income.
  • Mortgage payment must exceed 30% of family income.
  • That your mortgage payment has increased by 20% in recent months.
  • That the mortgage weighs on your habitual residence (not a second residence).
kid building a house

What does the aid consist of?

  • Freeze the mortgage payment for up to one year.
  • Extend up to 7 years the repayment term of the mortgage.
  • Reduce the interest rate on the deferred principal capital.
  • The bank commission for repaying the total debt or changing your mortgage from a variable to a fixed rate has been eliminated during 2023.

How many mortgages are there in Spain?

In the month of August 2022 alone, 37,000 home mortgages were granted, of which a 70% was formalized at a fixed rate and a 30% at a variable rate.

According to the newspaper El País, in Spain there are currently some five million mortgages (as of November 2022), of which 3.7 million are formalized at a variable rate.

Families in this situation are the most affected by the constant rises in Euribor (European interbank offer rate), which stands at 2.8% on November 23, 2022.

What is the Euribor?

The Euribor is the average interest rate at which a large number of European banks say they grant short-term loans to each other to lend it to third parties (individuals and companies).

In variable rate mortgages, the fee and interest are updated at each review (usually every six or twelve months), while in fixed rates the fee remains constant and stable as agreed between the bank and the client.

There is also the possibility of contracting a mixed mortgage that combines a fixed part and a variable part (it being customary to pay a fee with fixed interest for a few years and pay a fee with variable interest for another period of years).

Remember that there is the legal possibility of changing the conditions of your mortgage (novation) and that you can change your mortgage to another bank to obtain better conditions (subrogation due to change of creditor).

Within this subrogation, you can change both the person (physical or legal) that will be responsible for the payment of this mortgage and the bank that will assume the bank loan for the remaining amount (assuming the modification expenses according to the bank).

Can I buy a new construction apartment on the beach if I have applied for this aid?

The measure is only aimed at families and users who already have this debt contracted with the bank and not at new debtors.

In the same way, it is only directed, as we have already mentioned, to the habitual residence and not to the purchase of a second home or successive ones, although the measure brings to the fore the positive Code of Good Practices for all users of these.

Another requirement that would not be fulfilled (if you want to buy a new construction apartment on the beach) is that the debt with the bank has increased by 20% in recent months (since this time period has not yet occurred in a newly opened mortgage).

terraced house on the beach

 

If you keep dreaming of a terraced house on the beach or a new construction apartment on the beach and for this you have to apply for a mortgage, we leave you a link to Bank of Spain APR (Annual Equivalent Rate) Simulator where you can calculate the APR of your mortgage loan and compare loans from different banks.

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