Questions when taking out a mortgage loan
We answer the most common questions our clients have when they consider taking out a mortgage loan for the first time.
The Mortgage Credit Law 5/2019, which was published in the Official State Gazette (BOE) almost two years ago, brought significant changes for us. Since then, we as notaries have been able to act in the pre-contractual phase of mortgage loans.
What functions are performed?
The main function of the notary in the now required preliminary acts is first, to verify that the documents related to the loan conditions and their annexes have been delivered to the client in a timely manner; and second, to record the legal advice we provide during that act and address any questions raised.
Are the main characteristics of the loan understood?
During this time, we have found that most of our clients understand the main characteristics and conditions of the loan, which are as follows: principal, term, fixed or variable interest rate, and the expenses to be borne. However, there are other more complex concepts that should be explained, such as possible subrogation and fees for opening, modifications, early repayment, or claims for unpaid installments.
Property damage insurance: Is it mandatory?
Indeed, the bank requires property damage insurance for the mortgaged property.
In this specific case, we explain to our clients that the law allows the creditor to require them to have it (and also, though less frequently, an insurance guaranteeing the fulfillment of the loan contract obligations) but with an important caveat: there is freedom to contract these insurances, meaning it is not mandatory to have to contract them with the company dictated by the lending entity.
Direct deposit of salary? What about pension or bills?
At NOTARIA CRISTINA REQUENA, clients often ask if it is mandatory to have their salary, pension, or periodic bills (such as water, electricity, or phone) direct deposited into an account with the lending entity, or if they need to contract other insurances (life, health, or car) and/or pension plans or investment products with the company designated by the lender.
In all the aforementioned cases, we emphasize that contracting these so-called bundled products or services is not mandatory. Although they are often conditions for the bank to apply a discount on the agreed interest rate, thus reducing the loan payment. However, we recommend carefully studying whether it is worth it, as the cost may be greater than the discount on the applied interest rate.
Can a loan be repaid early?
The loan can always be repaid, in whole or in part, during its entire term. However, if there is a commission payable to the bank for this, it must justify to the client the financial loss incurred at the time of actual collection.
And what happens if I can't pay my loan installments?
It is particularly important to inform the parties about the meaning of universal asset liability and the mortgage foreclosure procedure that may occur in case of default, thus understanding the full extent of the obligations they undertake as a result of the mortgage loan.
Need help? If you are going to take out a mortgage loan, contact us here and we will answer all your questions.
