Mortgage in Spain to buy a home – Quick guide!
More and more people realize that they have a floor clause in their homes and decide to claim it from their bank. This decision took on special relevance since last December the Court of Justice of the European Union (CJEU) issued the ruling that said that the amounts collected in mortgage contracts since 2009, when these clauses began to be incorporated, should be returned.
As the vast majority of Spanish mortgages are in line with the Euribor -a fluctuating rate-, the banks decided to incorporate the floor clause that would allow them not to drop interest below a minimum, even though the Euribor to which the mortgages referred did .
Consulting a floor clause calculator is a fundamental step to avoid complications when claiming the floor clause from the bank. It allows knowing in advance the amount that can be claimed from the entity.
There is the possibility of calculating it through the calculator of the floor clause of the Organization of Consumers and Users (OCU), in which the amount can be detailed by entering some data: initial capital, date of signing of the mortgage contract, applicable differential or initial interest rate, among others.
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Recent judgments of the European and Spanish Supreme Court have made it possible to force banks to annul the "floor clause" of mortgages, and apply the initial interest rate agreed in the mortgage deed.
This implies not only the annulment of that "floor interest rate" (which limited how far the interest rate could go down) and the application of the agreed initial rate (with the corresponding reduction in monthly installments), but also the possibility of recovering all the amounts paid in excess by the application of the floor clause. In some cases, it is a significant amount of money.
Thus, some banks accept the annulment of the floor clause and the full return of all the interest collected in excess within a maximum period of three months from the time the client submits the corresponding request.
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The floor clause is a condition that includes or rather included a large part of the Spanish banking system in variable-rate mortgage contracts. When these were linked to the European reference index, the Euribor, or to other less relevant reference indices. Its inclusion obliged the client to pay a minimum rate or interest, regardless of the evolution of the market. In other words, he could not benefit from the excellent performance of these financial assets. As is happening in recent years, where specifically the Euribor is in negative territory, presenting a differential of – 0,161%.
Based on this general scenario, the Supreme Court ruling of May 9, 2013 declared the floor clause null and void and forced the banking entities to return the excess payments from the date of the ruling. On the other hand, with the European sentence came the total retroactivity that forced the credit entities to return the amounts paid in excess from the beginning in the contracting of the loan.
One of your missions as a bank user is to identify if the mortgage you have just contracted involves the floor clause. Especially in the event that you can influence or repair this incident since it will make you pay more euros than initially contemplated. Also, hire the professional services of a law firm. In short, there are many signs that can provide you to know if you really are facing a mortgage loan of these characteristics.
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The floor clause is a stipulation established in variable-rate mortgage loans that limits the variability of the agreed interest rate. For example, if you have a variable interest rate loan based on the EURIBOR plus 1% and the bank applies a stipulation that sets the minimum interest rate to be paid by you at 3%. Today, the EURIBOR is below 0%, so you should pay 1% on your mortgage loan, but due to the limit established in the floor clause, the minimum rate you will pay will be 3%, which does not seem fair at all, right? TRUE?
Most mortgage loans in Spain are variable rate mortgage loans. And most of these loans are based on the EURIBOR rate. And most of these loans were made in the real estate boom that finally blew up in 2008.
If the Floor Clause is abusive, this cannot affect the consumer in any way. This means that the loan will work as if the floor clause had not been applied from the beginning. It means that the floor clause has never existed because it is null and void from day one.
