What Are the Hidden Costs of Getting a Mortgage in Spain?

Sponsored by Klev&Vera International Law Firm.

Obtaining a mortgage, like many processes in Spain, involves bureaucracy and many formalities. With these formalities come hidden costs that go beyond obtaining and paying the mortgage itself. Fortunately, consumers have the opportunity to recover some of these mortgage expenses thanks to a decision by the Spanish Supreme Court. Recovering these expenses requires the assistance of an attorney that knows both local and federal laws regarding process and timing.

Hidden Costs. How Much Do You Need for a Mortgage in Spain?

A minimum deposit of 30% of the property's purchase price is needed to cover mortgage expenses and taxes. For non-residents this amount should be closer to 40%.

Some of the costs that buyers have had to bear include notary fees, registry expenses, a tax on documented legal acts (impuesto sobre actos jurídicos, or IAJD), appraisal and accounting expenses. In the past, banks have passed these expenses on to their customers and included clauses in mortgage contracts that potentially increase the cost of the mortgage. Most notably among them is the so-called “floor clause” (cláusula suelo), which establishes a minimum interest to be paid on a monthly basis regardless of fluctuating interest rates.

Reclaiming Mortgage Expenses

Some of these costs can be reclaimed, but only through the proper procedures. Reclaimable expenses include:

• Mortgage notary fees.
• Registry expenses.
• Tax on documented legal acts (IAJD).
• Appraisal expenses.
• Accountant or “gestoria” expenses.

Reclaiming these expenses involves first a non-judicial process and, failing that, an action in court. The out-of-court action takes place with the financial institution itself. Claimants must submit a request with the required documentation and calculated amounts. Should this fail, judicial action is permitted.

But where? According to Spain’s law of jurisdiction, an action must be filed before the court of first instance (juzgado de primera instancia) of the borrower’s domicile or the registered office of the defendant entity. In the case that the initial request fails, the action will proceed as a normal trial. This means there will be opportunities for mediation and other pretrial hearings. Should all attempts at settlement fail, a trial will ensue with a judgment rendered roughly 20 days after the conclusion.

Limitation Period

While the opportunity to reclaim expenses provides a benefit to consumers, the clock is ticking. Neither the Spanish Supreme Court nor Spanish Parliament have set a concrete limit for when such claims will have expired. In Barcelona, 10 years will be enough time, but other jurisdictions have settled on five. What’s more, different judges have come to different conclusions about when the timer begins. Some have suggested from the day of the Supreme Court's decree, others based the start time on when the expenses were actually accrued. These variations and uncertainties heighten the importance of seeking counsel that knows the jurisdiction where a claim will be made.

You can find more information about this topic on reclaimmortgageexpenses.com or if you prefer, send us an email to info@reclaimmortgageexpenses.com.

Helen Vera is managing partner of Klev&Vera with over 15 years of multi-cultural legal experience. Helen specializes in litigation and family law and is fluent in English, Spanish and Italian.

Sponsored by Klev&Vera International Law Firm.