What is the opening commission of a mortgage?
The opening commission of a mortgage is a fee charged by the lender when you take out a mortgage. This fee is typically a percentage of the total mortgage amount and is meant to cover the costs of setting up the mortgage, such as administrative expenses and legal fees.
The amount of the opening commission can vary depending on the lender and the specific mortgage product you choose. Some lenders may charge a flat fee, while others may charge a percentage of the mortgage amount. It is important to carefully review the terms of any mortgage offer before accepting it, including the amount of the opening commission and any other fees associated with the loan.
Where can I see if I have been charged the opening commission of a mortgage?
You should be able to find information about any fees charged, including the opening commission of your mortgage, in your mortgage contract. The mortgage contract is a legal document that outlines the terms and conditions of your loan agreement, including the interest rate, repayment terms, and any fees associated with the mortgage.
If you do not have a copy of your mortgage contract, you can request one from your lender. You may also be able to find information about your mortgage, including any fees charged, by logging into your online account with your lender.
If you have any questions about the fees charged on your mortgage, you should contact your lender directly to clarify the terms of your loan agreement.
The position of the Supreme Court regarding the opening commission
The European Union Court of Justice (ECJ) has just ruled that the opening commission of a mortgage when transparency requirements are not met is abusive.
The ECJ explains that the national judge must verify that the mortgage holder is in a position to evaluate the economic consequences that may result from this clause, understand the nature of the services provided in exchange for the expenses provided for in it, and verify that there is no overlap between the different costs provided for in the contract or between the services that they compensate.
It remains to be seen how the Supreme Court will fit this pronouncement from Europe.
This ruling from Europe leaves the door open to jurisdictional bodies (judges, in the end) to assess whether the borrower, when signing that clause, was in a position to know its economic consequences, as well as the nature of the services that the financial institution claims to provide and that justify its charge. It must also be verified that there is no duplication or overlap of the different expenses contained in the contract.
In September 2021, the Supreme Court raised a preliminary ruling to the ECJ on the opening commission in mortgage loans, considering that the previous issue raised to Europe on this matter was not well reasoned, so it wants to dispel doubts about whether its jurisprudence is contrary or not to European Union Law.
The case law that the Supreme Court dictated in its plenary sentence of the Civil Chamber 44/2019, of January 23, considered that the opening commission constitutes the price of the contract together with the remunerative interest, as it is one of the main retributions that the financial institution receives for granting the loan and does not correspond to eventual actions or services.
Thus, the Supreme Court argued that the opening commission is an essential element of the mortgage loan agreement that cannot be subject to content control when transparent.
An example of the text that can be found in our mortgage agreement is the following: “The BANK shall receive, as an opening commission, 0.75% of the loan, accrued and payable by the borrower in one instalment, at the time of the formalization of this transaction.”
Using a real example and according to the referenced clause, if the requested loan amount is €100,000, the amount to be paid for the opening commission would be €750. If the loan were €200,000, the amount to be paid for this commission would be double, or €1,500.
In this example, we can observe how the bank charges different amounts for the “same service” of an undetermined nature for different loan amounts.
How to challenge the opening commission
The most important thing is to find out and prove if the commission amount corresponds to an expense the bank incurred for granting the mortgage. In addition, the bank or financial entity must demonstrate that the commission charged corresponds to a specific and effectively provided service to the customer and at the customer’s request.
If this is not the case, this clause will correspond again to a general condition of the contract, predisposed and imposed (therefore, without negotiation with the mortgage debtor), which will be abusive for generating an imbalance between the rights and obligations of the contracting parties (lender and borrower) and to the detriment of the one who requested the mortgage loan with a guarantee, who is in an inferior position compared to the professional.
In this situation, the consumer-bank client must send a simple letter to the Customer Service Department of the financial entity with which they contracted the loan, which has two months to respond. If they do not respond or respond negatively to the claim, the consumer can file a lawsuit.
If a consumer decides to challenge the opening commission clause in court and have it declared null due to its abusive nature, they may be entitled to a refund of the amount paid plus legal interest. It is recommended to use this opportunity to challenge any other abusive clauses in the contract, such as those related to claiming debtor positions, moratorium or delay interest, early maturity, floor clauses, multi-currency clauses, 365/360 clause, etc.
These clauses should be included in the prior claim mentioned above, addressed to the Customer Service Department of the entity, in anticipation of a future lawsuit.
We understand that navigating the world of mortgages and associated fees, such as the opening commission, can be overwhelming. If you have any questions or concerns about buying a home in Spain or other fees associated with your mortgage, we are here to help.
Please do not hesitate to contact us for assistance. Our team of experts is dedicated to providing you with the information and support you need to make informed decisions when it comes to your mortgage.