The signing of a mortgage is probably the most relevant financial decision for an ordinary citizen. And as the recent history of Spanish banking reveals, the lack of information or inappropriate or abusive advice can lead to a very bad business, in which you are paying extra interest for too long. This damage, which already suffered the hundreds of thousands affected by the ground clauses, will hardly be repeated after the entry into force of the new mortgage law, on June 16, which maximizes the transparency with which the bank must sell the mortgage. The client also assumes his share of responsibility, by having to prove before a notary that he is fully aware of the terms of the credit he is going to sign.
The playing field for entities and clientele has been clearly defined although, with the law in hand, the negotiation process with the bank is still very important. Not only not to end up in court - an extreme that the new legislation aims to banish for the future - but to make the best possible financial decision. Contract a fixed or variable rate mortgage, subscribe other financial products with which to lower the interest rate or modify the terms of a previously contracted mortgage require a detailed study of the conditions agreed with the bank.
The negotiation is the key when the damage is already done, as happened with the ground clauses, and the bank agrees to reformulate the conditions of the mortgage to avoid a complaint in court. It is the situation that the numerous clients who have their mortgage linked to the IRPH index are now experiencing, which determines a much higher interest rate than the Euribor, and who are waiting for the EU Court of Justice to clarify definitively if The use of this index is transparent or not.
And those who find that the plummeting fall of the Euribor leaves a negative interest in their loan, and for which they should collect from the bank, they may also have reason to claim in the bank office. New and old mortgages raise many doubts. In certain cases, as in the IRPH, also the expectation of an economic improvement. Here are some keys to know what to expect from the bank in each situation and how to negotiate the best conditions for signing a mortgage.
1. Are you interested in a fixed or variable rate mortgage?
It is the first question that usually assaults those who seek financing to buy a house. The bank has put all the meat on the grill in its offering of fixed rate mortgages. The timing cannot be more propitious, with zero interest rates since March 2016 and no prospect of rising in the medium term. The bank insists that it is the opportunity to shield the mortgage fee for a future in which the rates will necessarily have to be higher, although the ECB is delaying time and time again the time for that rise before the growing economic slowdown and despite the fact that the current rate curve suggests that rates will remain very low over the next 8 years, as the AEB president himself recently acknowledged. "There will not be another occasion to sign a 30-year mortgage with a fixed nominal interest below 2%," said José Manuel Pedregal, director of financing solutions at Banco Sabadell, an entity that is making 70 % of its new production of fixed rate mortgages.
The security of signing a mortgage that will not give scares with increases in installment over time and a minimum price never seen is the big claim of the fixed rate. Opposite is the option of the variable rate, with a Euribor that deepens its fall to negative rates and that leaves in the first years cheaper rates than with the fixed rate. In the medium term, the horizon is of very low rates, according to ECB policy, although nobody is sure what will happen to the price of money in the long term, to which a mortgage is usually subscribed.
The bank is not obliged to provide future interest rate forecasts although it must explain to the client how the evolution of the indices has been in the past, thus offering a reference with which to create a value judgment.
2. What financial knowledge do you have to have to sign a mortgage?
The new mortgage law requires that the client overcome a kind of test before the notary, in which it is accredited that he understands all the terms of the contract before signing it. "The entire pre-signing phase requires more detail, in the test there are some complex questions," acknowledges José Manuel Artal, head of products for individuals at Ibercaja. The objective is for the bank to give all the information with maximum transparency and that it is recorded, before a notary, that the client understands it. To do this, you must answer if your mortgage has an opening commission, early repayment or unpaid installment claim. And answer questions like these: "In the case of a fixed interest loan, do you know that you will not benefit from a future decline in market reference rates?" "Did the financial institution inform you that it was you who had the right to choose a notary?" "Do you understand that the non-payment of the loan can lead to the loss of the mortgaged property and its sale at a public auction?" ...
3. What are the cheapest mortgages in the market?
Although until a few months ago, the price war was centered on mortgages at a variable rate, banks have now started betting on fixed-rate loans. In fact, since June, there have been up to three price drops. The first, with the entry into force of the new mortgage law; the second, at the beginning of September; and the third, in recent days, after the last meeting of the European Central Bank, in which it was confirmed that the zero-type environment is far from over. Given this situation, the prices of both products begin to approach and although variable mortgages maintain a very low differential from the second year - with the Euribor in negative territory -, the initial rates are already close to the interests of fixed mortgages. Coinc offers loans for the purchase of cheaper housing in the fixed rate offer, with an APR of between 2.21% and 1.84%, according to the repayment period chosen, although in the variable Kutxabank stands out, with an initial rate of 1.45% and a subsequent differential of the Euribor plus 0.89 points. Coinc has made two cuts in the last three months, as have Openbank and Bankinter. In fact, the prices offered by the digital entity of Banco Santander are lower than those of Coinc, but are limited to financing of up to 50% of the value of the home. The cuts are increasingly bulky: Abanca has reduced the APR by up to 80 basis points in recent weeks, although its products are still among the most expensive in the market, with an interest above 3%, a figure that Liberbank and Deutsche maintain Bank Above is the CaixaBank mortgage, with an APR of more than 4%.
4. Are mortgages at mixed interest rates interesting?
Although consumer associations such as Adicae warn of their lower transparency, by mixing concepts such as the fixed interest rate with the variable at the risk of confusing the customer, the truth is that banks are raising their commitment to mixed-type mortgages, that is , those with a fixed initial rate during the first 10 years and a subsequent differential for the rest of the life of the loan. ING has cut the initial interest rate by 40 basis points, up to 1.59%, while Ibercaja has cut it by 10 basis points, up to 1.8%. Also, entities such as Openbank, which gave little information about these products, have a cheaper offer: an initial rate of 1.45% the first decade and a Euribor differential plus 0.79 points later. Although these prices are applicable only to those who finance a maximum of 50% of the purchase or appraisal value of the home, for higher percentages it is below or on the same line as the other entities.
5. Should we subscribe products linked to the loan?
The new mortgage law prohibits banks from conditioning the contracting of a mortgage to the purchase of other products of the entity. However, it does allow to establish bonuses for hiring more products that make the loan cheaper.
When deciding on a loan or another for the purchase of a home, it must be borne in mind that a very low rate may entail the obligation of contracting several insurances in the entity, have a pension plan that may not be the most profitable or the most efficient in charging market commissions or making purchases with credit cards for a certain amount per year. That is to say, it may be that the mortgage interest rate is lower but the client will also assume for a long time the cost of other financial products.
However, Coinc's offer lacks conditions to achieve the prices indicated above. The same goes for the Pibank mortgage, while the Pichincha Bank only requires the client to open a checking account with the entity.
On the opposite side, there are new products launched by some banks that guarantee lower rates to those customers with higher incomes. This is the case of the Unicaja Fidelity mortgage - the Personal Banking mortgage requires a minimum income of at least 2,500 per month - or the Liberbank Opportunity mortgage, which reduces your fixed rate loan by up to 85 basis points, but requires minimum income 3,000 euros per month, compared to the 2,000 euros required for your mortgage now. However, in the variable modality, the Opportunity mortgage is more expensive.
6. What happens if the mortgage interest is negative?
The one-year Euribor, the index par excellence to which the Spaniards have linked the interest of their mortgage, marked an unusual minimum in negative territory, at -0.356%. And it is on its way to closing September on that line, around -0.34% in view of the fact that the ECB has reactivated the measures that ensure a horizon sine die of low rates. Such collapse of the Euribor assumes that those who hired a mortgage with very small differentials long ago now find that the interest rate on their loan is negative. That is, it is the bank who should pay you and not vice versa. This is the case of Bankinter customers who in 2007 signed a mortgage at Euribor plus 17 basis points, those of Deutsche Bank that did so at Euribor plus 0.18 or those at Santander, at Euribor plus 25 basis points.
Entities, however, are not paying customers with negative rates. The answer is to zero the interest rate while capital is still amortized. Loans signed from the entry into force of the mortgage law do include that clause zero, which annuls the option of applying negative rates, but there is usually no such clause with those signed years ago. The bank defends that it is against the legal nature of a loan that an entity ends up paying the client for lending money. "The mortgage loan figure itself has legal characteristics according to which it is a unilateral figure, so that obligations are only contemplated for the borrower to return the amount received within the agreed term, plus interest if any," bank sources say.
Fernando Zunzunegui, lawyer specialized in financial regulation, thinks otherwise. "The agreement between the parties is the Euribor plus a differential and must be fulfilled. There is a massive breach of bank contracts, it is a long-standing issue," he defends. Remember that, in the current zero-type environment, the Treasury does charge for issuing debt, although this principle "does not apply to the bank when it is creditor" and proposes that, if the interest is zero, a reduction in the capital is negotiated pending as compensation for that negative rate, a possibility that the bank does not accept either, by not recognizing the option of negative interest rates.
At the moment, it is a situation that does not affect many mortgaged, for very small amounts of money and on which the Bank of Spain does not pronounce. "The Bank of Spain lacks the competence to make a general pronouncement regarding the eventual application of negative interest rates to the typically banking products marketed by the entities with their clients, to the extent that in order to determine whether such application should proceed to what is stipulated in its clauses the bank contract in question ", they indicate in the institution.
7. What to do with a mortgage linked to IRPH?
It is the great judicial front that has now opened the bank because of mortgages. The abusive application of land clauses has already caused a multimillion-dollar bill in returns of the extra charges and the use of IRPH could generate another impact of millions of consequences. The IRPH is a benchmark index for variable interest mortgages, used to a much lesser extent than the Euribor, and whose use was defended years ago as a formula to give more stability to the installments, at a time of strong volatility in the mortgage Euribor . The use of IRPH resulted, however, at a much higher cost than that of the Euribor: if in January 2008 the IRPH of entities was 5.6% and the Euribor of 4.5%, two years later it was 4 , 9% versus 2.6% of the Euribor. Currently, the IRPH of entities is at 1,913%, far from -0,356% of the mortgage index.
The increase in mortgages with IRPH against the use of the Euribor - and which has affected about one million mortgages that would have paid an average of 20,000 euros more according to Asufin (Association of Financial Users) - has ended up in court. In early 2020 the European Court of Justice is expected to rule definitively on whether its use is abusive or not. The attorney general of the CJEU, a kind of prosecutor, already advanced in September that the use of IRPH - backed by the Spanish Supreme Court as a legal index, officially recognized by the Bank of Spain - must be subject to the transparency directive and that Being a "complex and not very transparent mathematical formula" for an average consumer, the validity of its use is conditional on the client having received all the necessary information.
8. What options are there to reach an out-of-court settlement about IRPH?
As with the ground clauses, the banks have been advancing to a possible judicial blow and have been negotiating with the clients the change in the mortgage, usually a fixed rate. It is what they have done in entities such as Sabadell and Caixabank, the most played with the IRPH, with credits for 6.7 billion euros. "You have to know what you are receiving and what you give up and it is important to have a financial expert to do the calculation. Obviously, the bank will not return everything," warns Fernando Zunzunegui.
Negotiation of mortgage interest is also the formula that is being followed with those affected by IRPH who have already gone to court. Thus, Caixabank is agreeing these days with clients in specific cases of mortgages with IRPH that were being processed in the Supreme Court - confidential agreements and that obviously go through to renounce a new judicial claim - and has also adhered to the proposal of courts of Pamplona and Barcelona, which have established protocols to promote quick agreements between the bank and the client. Especially in simple matters, such as the payment of the expenses of the mortgage or the clauses of early maturity, on which there is a clear doctrine.
"If you file a lawsuit the bank offers you more in a negotiation than if it is not done," criticizes Patricia Suárez, president of Asufin, who also questions that it has been a good practice to change a mortgage with IRPH, at a variable interest, to One at a fixed rate. "Negotiating with the bank is fine, but whenever it is acceptable. You have to be careful not to sign abusive agreements," he adds. Thus, remember that the CJEU has also received claims for the novations - the changes in the credit conditions signed before a notary - made in the agreements with clients with ground clauses.
9. What is the cost of reporting the bank to court?
The granting of mortgages by the bank in recent years - and in the absence for a long time of a law that would protect the bank client clearly - has been prosecuted to the point of collapsing the courts. Land clauses, mortgage expenses, IRPH ... complaints have multiplied and have boosted the activity of consumer associations and also specialized law firms.
The denunciation in the courts, even having a high expectation of recovering the overpaid, has a cost for the affected person to consider, especially if the lawyer is going to be the one who enters the costs and legal interests of a sentence favorable to his client. Thus, numerous law firms offer the process free to the client who denounces their bank, although in exchange for keeping the legal costs and legal interests, those that apply on the amount that the client must receive from their entity according to the sentence. As they calculate in Asufin, for a mortgage with IRPH signed in 2013 and in which 20,000 euros have been paid more - and whose return recognizes a sentence - legal interests exceed 3,800 euros, which the client would not receive if he agreed at the time Give them to your lawyer.
"In the case of IRPH, it is prudent to wait for the CJEU's ruling and then raise the lawsuits. Prolonging the processing time of the lawsuit is only for the benefit of the lawyer who then stays the costs," explains Fernando Zunzuneghi.
10. Who assumes mortgage expenses?
The new mortgage law settled all doubts of that other judicial front. Faced with what happened before, it is the bank that corresponds to all the expenses of the mortgage, such as registration, notary, advice and payment of the tax of documented legal acts. Only the appraisal is paid by the customer.
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