If you’re buying a property in Spain, you may need to apply for a loan. In this case, you’ll probably shop around banks and may receive favourable replies to your application. These replies are often binding mortgage offers, but what does such an offer mean? And what are its consequences for you, the future mortgage holder?
What is a binding mortgage offer?
An oferta vinculante is a document from a financial entity that details all the conditions and features of your mortgage offer. The mortgage conditions and characteristics are usually based on your affordability factor and/or the state of the property.
Who is bound by the offer?
In this case, Spanish law is firmly on the buyer’s side because the offer is only binding for the bank. You, the buyer, have no obligation to accept it. On the other hand, the bank must comply with all the conditions and characteristics in the offer and cannot change them if you decide to accept it.
What are the advantages of this for the buyer?
Since the offer is only binding for the bank, you can shop around and compare mortgage deals from different banks without the obligation to accept any of them. This gives you the freedom to decide and negotiate. For example, if you like the sound of an offer but would like certain aspects of it to be improved, you can go back to the negotiating table.
What does a binding mortgage offer contain?
It’s usually an extensive document that details the following:
- Financial aspects of the mortgage – capital lent, interest rate, monthly repayment amount, and how this may vary if the interest rate changes.
- Commission applicable – for the mortgage set-up, early repayment, default on payment, interest rates applicable to the late payment, etc.
- Costs associated with the mortgage – initial charges and fees for set-up.
- Value of the property – the valuation figure used by the bank to determine the loan and the relationship between the amount you borrow and the property’s value.
How long is a binding mortgage offer valid?
Once the bank gives you a binding offer, you have around 14 days to accept or reject it. Some banks may give you more time, but you never have to decide in less than ten days. If you don’t reply within the specified timescale, the bank assumes you have rejected the offer. As a result, it no longer applies.
Need help with your mortgage in Spain?
At Costaluz Lawyers, we pride ourselves on our skills in negotiating with Spanish banks and getting better deals for our clients’ mortgages. If you’d like assistance with your loan conditions, get in touch for a free consultation.