The Finance Bureau’s Tancrede de Pola explains mortgage holiday rules as the Spanish property sector battles on through COVID-19

THE Spanish property sector has been as affected as any other by the coronavirus pandemic.

Although things haven’t been completely shut down as with bars and restaurants, we have seen the usual stream of new inquiries pretty much turn into a trickle.

But I am hoping there will only be a temporary blip in the market once things start opening up again.

In any case, the banks are still lending, we are still processing mortgages and notaries are still signing mortgage deeds – albeit at a slower pace, and mainly just for sales considered ‘urgent’, and organised via prior appointment.

There are various practical issues with new applications.

One of the main obstacles is physically getting the valuer out to value the property due to the restrictions on freedom of movement.

Meanwhile there have been reports of lenders asking buyers for assurance that their company is not applying for ERTE.

Workers in industries severely hampered by COVID-19 – like hospitality – may be less likely to pass banks’ risk analysis tests to qualify for loans than before the crisis.

This is not because the tests are any different – they have remained the same – but because people who have lost several months income or, even, their jobs, may not pass banks’ ‘scoring’ systems due to their reduced income or new employment status.

However, there is positive news for existing mortgagors. On March 17 the Government announced by Royal Decree a ‘moratorium’ or ‘mortgage holiday’ for residents struggling with payments.

The rules are roughly as follows:

• The first and most important things to understand is that this is not a ‘holiday’ but merely a deferral. Mortgage holders will be required to make up the shortfall when normal service resumes and this will mean higher monthly repayments until the amount deferred is made up.
• The period of deferral is likely to be available for three months, although there is a possibility this will be extended to six months.
• It is only available to residents on their primary residence. It is not available to non-residents with a mortgage on their holiday home.
• Mortgage holder income must be less than €1,600pm and monthly commitments, including the mortgage, must exceed a third of income.

The deadline for mortgage holiday applications is understood to be May 3, although it could yet be extended by the Government.

The Finance Bureau has more than 15 years’ experience in finding expats the best deal possible.

We will help them make sure they’re avoiding the many pitfalls associated with buying abroad, especially during the current crisis.