Confusion reigns in Spain
The mortgage market was thrown into turmoil last week when a Supreme Court ruled that Banks in Spain should be liable for picking up the cost of Mortgage deed tax called AJD rather than the borrower.
AJD tax who is responsible for paying it
In a reversal of their findings in February 2018, 3 Judges decreed that going forward for mortgages in Spain the lender would be responsible and that back claims for a refund could be made for those who have own the past paid it.
Due to the huge financial implication of this ruling the Spanish Government suspended the decree and asked the Supreme Court to resit and review their own decision.
Impact on the lenders in Spain
As previous loans were granted with interest rates that had a margin that allowed the Banks to make a profit on the lending facility any extra cost that now has to be repaid would put many loans into a loss situation, along with giving the Banks a potential bill of around 24 million.
The Spanish Banks already have made to clear they will challenge any compensation claims and redirect claimants back to the tax office who was the final beneficiary of the income stream.
Will the borrower benefit in the long term
The rationale for the decision to make the lenders in Spain responsible is somewhat spurious as the tax must be paid if a loan deed is signed at Notary and the only way under current legislation to secure a loan is to have it signed at Notary.
Finally going forward interest rates will be adjusted to take into account the new upfront costs so finally new borrowers are unlikely to gain any long term benefit.
Read the full article Mortgage deed tax in Spain to be or not to be
