money back on overpaid interest for your spanish mortgage
DO YOU KNOW THAT YOU CAN CLAIM BACK ALL INTERESTS UNDULY PAID UNDER YOUR SPANISH MORTGAGE?
- WHICH INTERESTS CAN BE CLAIMED BACK?
Not all, but only those which have been charged by your Spanish bank by applying a so-called “floor interest rate” inserted into your loan documents when you took out your mortgage.
- WHAT IS A “FLOOR” INTEREST RATE?
Most probably, your loan features a variable interest rate, which is made up of two elements: EURIBOR (i.e. the base interest) plus a margin (1%, 1.50%, etc).
EURIBOR fluctuates each month, so the interests that you actually pay to your bank depends on how EURIBOR evolves during the term of your mortgage: the lower the EURIBOR, the lower the interests that you end up paying, and vice versa.
However, Spanish Banks decided in some instances to protect themselves against future decreases in EURIBOR and pushed their clients to accept “floor interest rates”, by which a minimum interest rate would be applied even if EURIBOR dropped sharply.
This way, by inserting these “floor interest rates” into the mortgage loans, Banks locked themselves in against declining interest rates, but borrowers ended up paying more than they should if no such floor interest rate applied.
- CAN YOU GIVE ME AN EXAMPLE?
Let’s imagine that your loan has a variable interest rate made up of EURIBOR plus 1.5%, and that the outstanding principal is 100,000 €.
As EURIBOR is currently negative (-0.1%), then the resulting interest would be (-0.1 + 1.5)= 1.4%.
So, in principle, the total interest that you would have to pay per year would be (100,000 € X 1.4%)= 1,400 €
However, if the loan features a “floor interest rate” of, say, 3% this means that the bank will be applying this 3% interest, and NOT the 1.4 % resulting from the normal variable interest mechanics.
So, in our case, the bank will effectively be charging you an annual interest of (100,000 € % X 3%)= 3,000 €
In sum, instead of charging you only 1,400€ worth of interests per year, you would be ending up paying 3,000 €, that is to say, 1,600 € in excess of whay you should pay.
This scenario may have been happening for a number of years, so your loss may have grown exponentially: you will be entitled to 1,600€ for each year of your loan in which the bank applied the floor interest. So, if this situation has been going on for, say, 3 years, you will be entitled to 1,600€ X 3= 4,800 €.
It is this 4,800 € “extra” interest that can be claimed back from your bank.
- WHY CAN FLOOR INTERESTS BE CLAIMED BACK?
Because two landmark rulings issued by both the Spanish Supreme Court and the EU Court of Justice so establish on the grounds that “floor interest rates” are abusive and inequitable.
In addition, early this year the Spanish Government passed a piece of legislation making it easier for borrowers to claim back these undue interests.
- HOW DO I KNOW IF MY MORTGAGE FEATURES A FLOOR INTEREST RATE?
If, over the last years, in spite of news about dropping EURIBOR you have been paying the same interests on your mortgage, then the loan may feature one such “floor interest rates” (unless your loan is based on a fixed rate, and not on a variable rate, which is not typically the case).
To be certain about it, you will have to check the “interest” clause under your mortgage deed and identify the floor interest rate.
- AM I ELIGIBLE TO THE CASH BACK IF MY MORTGAGE ALSO FEATURES A “CEILING” INTEREST RATE?
In some instances, the clause that the Banks inserted into the loan documents capped fluctuating interest upwards (ceiling) and downward (floor) in an attempt to make the provision more equitable (the borrower would also benefit from increasing EURIBOR !!).
However Spanish courts have held that such ceiling interest rate does not alter the borrower’s right to claim back interests paid as a result of floor rates.
- DO I HAVE TO GO TO COURT TO CLAIM MY CASHBACK?
The new piece of legislation passed by the Spanish Government lays down an out of court procedure whereby Banks are given a 3-month period to accept the cashback.
Only if the bank turns down the cashback application (or offers an insufficient cashback) will the borrower have to resort to litigation in court against the bank.
So, ultimately, it is the bank´s decision to make an out of court settlement of this matter to avoid litigation.
- HOW DO I GET STARTED?
Firstly, before going any further, you need to make sure that you have been affected by a “floor” interest rate, which (as said before) will entail the checking of your mortgage loan in order to find out whether the relevant clause was inserted by your bank.
To do so, you will have to get hold of a recent bank slip of your mortgage loan and, if possible, a copy of your mortgage deed.
- HOW CAN YOU HELP ME?
At CUM LAUDE LEGAL we will do that checking for you for FREE. So, you will not have to pay any charges or fees to get peace of mind as to whether you have been unduly paying extra interest on your home mortgage in Spain.
If we conclude that you are eligible to get the cashback, we could lead you all the way through the out of court process on the basis that we will only charge you fees if you get your cashback or similar economic compensation. No cashback, no fees ¡!!
If you should wish further information or would like us to check whether you are eligible, simply give us a call on
+34 968 032 010
or drop us an email at [email protected] and get the process going ¡!
WHO ARE WE?
We are a Spanish law firm with extensive experience in advising foreign purchasers on the legal matters related to the acquisition and holding of their properties in Spain, such as conveyancing, tax compliance and mortgage finance. Our solicitors are fluent in English, so language will not be a problem to deal with the cashback claim.
Please pay a visit to our website to get to know us better:
Our office is located in La Torre Golf Resort, which may prove convenient for those homeowners with properties in the surrounding areas (Polaris Resorts, Costa Cálida, Orihuela Costa, etc) seeking personal touch in the cashback claim.