Mortgages
During COVID What Can You Do?

The health crisis caused by COVID-19 has
had immediate social and financial consequences, and has put the different
markets in the spotlight: the fear of a possible collapse is a reality and a
change in the outlook can seriously alter the rhythms of economic growth and
investments in the different sectors.

One of the sectors that has experienced
(and is experiencing) this situation with the greatest uncertainty is real
estate, since all economic crises affect, not only the price, but also the
supply and demand for housing.

This situation has also generated many
questions about mortgages , both from those people who have a mortgage loan and
who have lost part of their income due to layoffs or ERTES, as well as from
those who were pending the granting of a mortgage to buy a flat or a house, and
now they are afraid that the bank will change the requirements to grant them
their loan.

At Deplace we are experts in real estate
services and we advise our clients to find a house according to their needs
with the best financing. In this article, we will try to explain what the
mortgage situation is like after the coronavirus in Spain and what options both
the government and the banks offer to the people most affected by COVID.

One of the first measures approved by the
Government of Spain after the declaration of the State of Alarm was the
granting of a moratorium on the payment of mortgages for those people who have
seen their income reduced due to the coronavirus health crisis.

The decision was put into practice on March
19. As of this date, people with a mortgage and who met certain requirements
could request, within a period of 15 days, the suspension of payment of their
mortgage payments.

In the Council of Ministers on July 7, the
Executive approved the extension of the term to request the moratorium on
mortgages due to COVID until next September 30 .

This government moratorium, with an initial
duration of three months, can be extended by the banking entities that make up
the CECA and AEB for a maximum period of 12 months, and can be applied to both
mortgages and personal loans.

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But how does this affect mortgages?

Basically, a moratorium is the possibility
of postponing the monthly payments of the mortgage for a certain period of
time. While the moratorium lasts , the loan is frozen and the interest does not
increase . Nor will you have to contract new linked products, although the
entity can reserve small changes in the previously contracted insurance in
order to guarantee that the client pays their debt.

Who can request the moratorium on mortgages
due to the coronavirus promoted by the Government?

In our country, the granting of moratoriums
on mortgages due to COVID-19 promoted by the Government is aimed at both the
self-employed and employed workers , and can be requested in the following
cases:

Payment of mortgages on the habitual
residence .

Payment of mortgages for premises, offices,
etc. where the self-employed professional develops his economic activity.

Payment of mortgages on homes other than
the usual rental situation and in which the mortgage debtor has stopped
receiving the rent.

The requirements to request this deferral
of the mortgage payments are:

Having become unemployed .

Have presented the cessation of
professional activity (in the case of the self-employed).

That the income of all the members of the
family unit does not exceed, in the month prior to the request for the
moratorium, the limit of three times the monthly Public Indicator of Multiple
Effects Income (IPREM).

That the mortgage payment represents more
than 35% of the net income received by the family unit.

That there has been a "significant
alteration" of the economic circumstances of the family unit derived,
directly, from the coronavirus crisis.

In all cases, to request the moratorium,
the following documents must be presented at the bank :

Certificate of performance.

Certificate of the State Agency of the Tax
Administration of cessation of activity.

Family book and registration certificates
of the people who currently reside in the house.

Simple note from the Property Registry,
mortgage deeds and home sale contract.

And what about the bank moratorium?

In principle, the banks have not
established specific requirements to be able to request the moratorium on
mortgages due to the coronavirus, with the entities in charge of negotiating
the conditions directly with each of their clients.

In any case, the banks' moratorium on
mortgages due to COVID allows access to this help to those who do not meet the
parameters indicated by the Government .

Furthermore, these are not exclusive
measures. In other words, a person can request the Government's moratorium for
three months and, after that time, agree with their bank on an additional
deferral of their mortgage.

Do I have other options to defer my
mortgage?

If a person does not meet the necessary
conditions to request the moratorium on mortgages due to the coronavirus from
the Government or their bank , they have two alternatives to postpone their
payments :

Request a mortgage deficiency .

Extend the repayment term of the mortgage.

The mortgage default or grace period of a
mortgage loan is a time during which the amount of the monthly mortgage
payments is reduced . This reduction can be of a part of the mortgage (interest
or principal) or of the total mortgage payment, and can last several months and
even years.

The problem with this alternative is that
this "breather" is not free and has some drawbacks.

On the other hand, to reduce the monthly
installments of your mortgage you can extend the repayment term, although in
this case the interest payable will increase . In addition, you must make a
mortgage novation, that is, a change in the conditions of your mortgage
contract , with the expenses that this may entail (notary and registration
costs, as well as a novation commission based on the amount pending
amortization).

The effects of the coronavirus on mortgages
are evident, although it is still too early to make an objective analysis of
the situation or predict what will happen in the coming months.

On the one hand, it is possible that, in
this climate of uncertainty, banks will tighten their requirements for granting
short-term mortgages to avoid suffering defaults in the future. This will
translate into fewer mortgage grants to buy homes or higher interest rates
applied to them.

Banks are also likely to bet on fixed-rate
mortgages, since, in this way, they will avoid the collapse of interest if the
Euribor remains negative.

If you are thinking of buying a home,
contact Deplace . We will advise you and help you get the best financing for
you.

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