The Spanish government has approved a new measure to help people with difficulties paying their mortgage following a sharp drop in their income.
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Days after the Spanish Government declared the state of alarm in response to the COVID-19 outbreak, it approved a mortgage payment holiday for vulnerable individuals. This was just one of the measures included in Royal Decree-Law 8/2020 of 17 March on Urgent and Extraordinary Measures to Deal with the Economic and Social Impact of COVID-19. This means that anyone who has lost their job or experienced a sharp drop in income as a result of the crisis can freeze their mortgage payments—and avoid the risk of losing their home.The measure is one of several that the Government has already adopted as it aims to limit the impact of coronavirus on the Spanish economy. Here, we’ll tell you everything you need to know about the requirements you need to meet, how to request a payment holiday, and what the deadlines are.
Eligibility to request a mortgage payment holiday
The first thing to consider is whether you're considered to be "at-risk", and therefore financially vulnerable. According to the decree-law, the factors which indicate financial vulnerability include a loss of employment or a significant drop in income of 40% or more for the self-employed.
Additionally, the household's income in the month before the payment holiday is requested must not have been more than three times the IPREM ("Indicador Público de Renta de Efectos Múltiples"), Spain's reference index for determining social benefit. This currently stands at €537.84 a month, so the household income must be less than €1,613.52.
The mortgage payment, plus basic living expenses and bills, must be greater than or equal to 35% of the household's net income.
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The payment holiday can be requested up to fifteen days after the Royal Decree expires, which will be one month from its entry into force on 18 March. The Government can extend the validity by means of another decree-law. Once the request has been approved, the borrower will not have to make any mortgage payments during the stipulated period, so the mortgage provider cannot demand any payment of the mortgage or associated fees. It's important to note that no interest will be accrued during this period, either.
Filing the request
The borrower must file the request with the mortgage provider. Most of these credit institutions have set up online procedures for this, which means avoiding having to make the trips in person.
Time limit for granting the request
Once the relevant paperwork has been submitted, the credit institution has 15 days to process the request.
Required paperwork
A request for a payment holiday will still be processed even if the borrower cannot provide all of the required paperwork; they must ensure that these documents are submitted no later than one month after the end of the state of alarm. The documents needed to request the payment holiday must prove the borrower's employment situation, the number of people in the household and their ownership of the property. Depending on whether the borrower was an employee or self-employed, these are the documents required:
Unemployed: certificate issued by the relevant social security administration agency showing the amount received in unemployment allowances or benefits.
Cessation of business activity: certificate from the Spanish Tax Agency ("Agencia Estatal de la Administración Tributaria") confirming the cessation of business activity.
Number of people in the household:
Family record book ("libro de familia")
Certificate of registration at the local town hall ("certificado de empadronamiento") of the people registered as living at the address. These residents must have been registered as living there for at least the previous 6 months.
Statement of disability, dependency or incapacity, if applicable.
Ownership of the property:
Deed of purchase of the property and proof of granting of the loan or mortgage
Non-certified land registry extract ("nota simple") for all members of the household.
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