Reverse Mortgage law

First Additional Provision. The regulation relating to reverse mortgages.

1. For this Act, a reverse mortgage shall be understood to be a loan or credit secured through a mortgage on a property that constitutes the applicant’s habitual residence, provided that the following requirements are met:

a) The applicant and the beneficiaries that he/she may designate are persons aged 65 or over or affected by severe or great dependency
b) The debtor has access to the amount of the loan or credit employing regular or one-off drawdowns
c) The debt is only payable by the creditor and the security enforceable on the death of the borrower or if so stipulated in the contract, on the death of the last of the beneficiaries
d) The mortgaged property has been appraised and insured against damage following the terms and requirements set out in Articles 7 and 8 of Law 2/1981 of 25 March 1981 on the Regulation of the Mortgage Market.

2. The mortgages referred to in this provision may only be granted by credit institutions and by insurance companies authorised to operate in Spain, without prejudice to the limits, requirements or conditions imposed on insurance companies by their sectoral legislation.

3. The regime of transparency and marketing of the reverse mortgage shall be that established by the Minister for Economic and Finance Affairs.

4. Within the framework of the transparency and customer protection regime, the entities established in paragraph 2 that grant reverse mortgages shall provide independent advisory services to applicants for this product, taking into account the financial situation of the applicant and the economic risks derived from the subscription of this product. Such independent advice shall be provided through mechanisms to be determined by the Minister for Economic and Finance Affairs. The Minister for Economic and Finance Affairs shall lay down the conditions, form and requirements for the performance of these advisory functions.

5. Upon the death of the mortgagor, his/her heirs or, if so stipulated in the contract, upon the death of the last of the beneficiaries, may cancel the loan, within the stipulated period, by paying the mortgagee the full amount of the overdue debts, with interest, without the creditor being able to demand any compensation for the cancellation. If the mortgaged property has been voluntarily transferred by the mortgagor, the creditor may declare the loan or secured credit to be due in advance, unless the collateral is sufficiently replaced.

6. When the loan or credit governed by this provision is extinguished and the mortgagor’s heirs decide not to repay the overdue debts, with interest, the creditor may only recover up to the extent of the assets of the inheritance. For these purposes, the provisions of the second paragraph of Article 114 of the Mortgage Law shall not apply.

7. The public deeds that document the operations of incorporation, subrogation, modifying novation and cancellation shall be exempt from the gradual quota of notarial documents of the modality of documented legal acts of the Tax on Property Transfers and Stamp duty.

8. For the calculation of notarial fees for deeds of incorporation, subrogation, modifying novation and cancellation, the tariffs corresponding to “Documents without amount” provided for in number 1 of Royal Decree 1426/1989, of 17th November, approving the Notaries’ tariffs shall be applied.

9. For the calculation of the registration fees for deeds of incorporation, subrogation, modifying novation and cancellation, the fees corresponding to number 2, “Inscriptions”, of Annex I of Royal Decree 1427/1989, of 17 November, approving the Property Registrars’ fees, shall be applied, taking as a basis the figure for the capital pending to be paid off, with a reduction of 90 per cent.

10. Reverse mortgages may also be taken out on any other property other than the applicant’s habitual residence. The previous sections of this provision shall not apply to these reverse mortgages.

11. In all matters not provided for in this provision and its implementing regulations, reverse mortgages shall be governed by the provisions of the legislation applicable in each case.