The Mortgage is a Real Right , that is, it falls on a good or thing (generally a property) and follows where it goes. Said Right, for its validity, must be inscribed in the Property Registry (with the exception of the Naval Mortgages which are another History). This Registry informs other potential interested parties of this situation and is a basic element of the Spanish mortgage system. It also allows to establish an order in the mortgages or other charges that fall on the signature.
Said Real Right is a guarantee of a principal obligation . The obligation to be guaranteed may be the result of an agreement, as in the case of a loan, or by a legal obligation. In any case, the mortgage guarantee does not exclude the personal guarantee of the obligors. It is additional to it. And since we have talked about loans it is convenient to make the first important nuance. As you have already deduced, strictly speaking, a mortgage is not the equivalent of a mortgage loan. There may be guarantees, current account credits, discount lines, all with a mortgage guarantee. And logically also loans with mortgage guarantee. What happens is that these are the most frequent, since in Spain, given the tendency to property versus rent in the case of housing, the expression has been generalized when referring to the mortgage loan.
- It should be noted the difference between the amount owed (which may not even be specified at the time, although you always have to specify a limit) and the so-called mortgage liability . The mortgage liability is the sum of the amounts from which the asset specifically responds, and they are distributed in principal, which coincides with the amount owed, interest for late payment and an additional amount for costs and procedural expenses. So, if I owe 100, usually the sum of the 3 concepts is usually moved over 150, depending on the bank.
- The aforementioned concept is important, on the one hand so as not to frighten us, because some believe, when they see it, that they owe more than they really owe. And on the other because the Tax on Documented Legal Acts is revolving on it . Said taxes are subject to the competence of the CCAA , and unless we subrogate in the mortgage or have some type of recognized exemption comes to generally assume a 1% on the Mortgage Liability.
- In essence, the Mortgage gives the creditor the right to execute, to bring to public auction , through the legally established procedures, the good that serves as collateral. The creditor can not appropriate it directly. The owner can do what he wants, sell it, mortgage it again, etc. But the buyer must be aware that, although he has nothing to do with the obligation that gave rise to the mortgage, the good responds to it while it persists. And to put another example, the one that seizes it or the one that mortgages it after a previous mortgage already registered, must assume that the one has a preference of collection in case that we reach the next point.
- The Mortgage is not an exclusive guarantee. I explain. Every debtor, according to our Civil Code, responds with all his present and future assets. The Mortgage is an accessory guarantee, which depends on that main obligation. If the main obligation is extinguished, the same happens with the mortgage. But the other way around does not happen. If, for example, due to non-payment, the creditor takes the home to auction and if it obtains an amount less than the debt it guarantees, the debtor is not released. You are still obligated to pay the remaining amount by virtue of your personal guarantee, which we indicated in the first point. It is a fundamental difference with other countries .
- Some think that the strength of the Spanish mortgage guarantee is a mistake to correct. I do not see it like that. In the first place because, if not, to follow the North American model, the mortgage becomes a mortgage option, if I am allowed the simile. If I’m not interested there, I leave the problem to the Bank (and who says the Bank tells its shareholders and depositors). Logically, and in the second instance, the Banks would stop lending with the terms, amounts and guarantees to which we are accustomed, and it would be difficult to find a valid financial alternative for such acquisitions.
- To specify in the figure of the mortgage loan, I think it convenient to remember that in addition to lender and borrower, nothing prevents theappearance of additional guarantors: guarantors, or people who mortgaged assets in favor of the debtors. It usually occurs when the creditor considers that the initial guarantees are insufficient, especially if in the case of the homes, 80% of the appraisal value is exceeded. And it is that, the buildings have to be appraised previously by some of the homologated entities.
I know there are many questions left in the air, for that are the comments and a post that will come later. In any case, I think that together with the links that I put at the bottom of the page, you may find them useful.