How to renegotiate mortgage conditions
The Euribor is already rubbing 2.9%, which means that mortgages will become between 200 and 300 euros more expensive in the month on average. Families with more economic problems will be able to take advantage of the new measures agreed between the Spanish government and the banks to reduce the pressure in the short term, but many others will have to negotiate with their banks.
November ended with the Euribor above 2.8 % and in the first days of December it is already close to 2.9 %, the highest rate in 14 years. The rise in the last few months has been enormous, given that only a year ago this index, which serves as the basis for calculating interest on variable mortgages, stood at -0.5 %. This means that both new mortgages and annual revisions of variable interest rate mortgages are much more expensive than a year ago, between 200 and 300 euros per month on average.
As this indicator is expected to continue to rise and exceed 3 % in the first months of 2023, most new mortgages are being taken out with a fixed interest rate, despite the fact that in many cases it is already close to 4 %. For those who are due for an annual review of a variable rate mortgage, the only option is to renegotiate the conditions with the same bank or other institutions.
Slight relief for the most disadvantaged households
Families living in homes of up to 300,000 euros and with an income of less than 25,200 euros per year will be able to take advantage of the measures provided for in the reform of the Code of Good Practice.
This code has recently been modified following negotiations between the Spanish government and the banking sector to address the situation of non-payment in which many families find themselves. However, it should be borne in mind that not all financial institutions adhere to this code.
For those cases in which the increase in the mortgage effort is greater than 50%, the code provides for a five-year grace period for the principal and a reduction in the applicable interest rate, which would go from Euribor plus 0.25% to Euribor minus 0.10%. When the increase is less than 50%, the grace period will be two years and the term will be extended to seven years. The period for requesting dation in payment of the property is also extended to two years, and the period for requesting social renting of the same property from the bank if evicted is extended from 6 to 12 months.
It should be borne in mind that since its enactment in 2012 until the fourth quarter of 2021, the code had only been applied in 62,526 operations, of which 54,190 ended with the restructuring of the outstanding debt, 19 with a debt write-off and 8,317 with the dation in payment.
Improvements for the middle classes
Families with incomes of up to 29,400 euros can also benefit from a series of measures that will be included in a new code, but only if the mortgage burden is higher than 30% of their income and has increased by at least 20%.
In these cases, financial institutions will have to offer the possibility of freezing the instalment for 12 months, a lower interest rate on the deferred principal and an extension of the loan term of up to seven years. Expenses and commissions will also be reduced to facilitate early repayment and the change from variable to fixed-rate mortgages.
The resource of negotiation
Even if you do not find yourself in any of these vulnerable groups, you can always resort to negotiation with your financial institution to change some of the conditions of the mortgage. Keep in mind that they will probably prefer a bad deal to a reasonable default problem.
In this sense, it is important that you sell well the modification you want, and the possibility of changing to another entity with better conditions is the most effective argument if you do not have large penalties for early cancellation. You should also be aware that you will probably have to haggle and accept trade-offs.
The two legal options to introduce changes in the mortgage conditions are a novation and a private contract. Note that the former is more complex and will involve notary fees, while the latter will not. You will also have to keep an eye on the fees established in the deed for the modification of the credit conditions.
Do not forget that, when negotiating a mortgage, we should never underestimate the part of the commissions and penalties, as they can make us prisoners of the bank.
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