Renegotiating a mortgage with a floor clause can be an important aspect for those who wish to improve the conditions of their mortgage loan and reduce the economic impact of this type of clause. In banking law, these provisions have been the subject of numerous claims, as in many cases they have been declared abusive for limiting the lowering of variable interest rates, such as the Euribor, which results in unnecessarily high monthly payments.
At BUFET GÓMEZ FERRÉ, lawyers specialising in floor clauses in Barcelona, we explain below how to identify these clauses, what steps to take to renegotiate with your bank and how to protect your rights as a consumer.
What is mortgage renegotiation?
Mortgage renegotiation is the process by which the mortgage holder and the bank agree to modify the original conditions of the loan. This may include changes to the interest rate, the repayment term or the elimination of specific clauses such as the floor clause.
Key methods for mortgage renegotiation
In legal terms, mortgage renegotiation can be carried out by two main methods:
- Novation: this consists of renegotiating the terms of the mortgage with the same bank. This procedure allows you to change specific conditions of the contract without having to change bank.
- Subrogation: this involves transferring the mortgage to another bank that offers more favourable conditions. This option can be useful to reduce the impact of variable interest rates or Euribor on the loan.
The main objective of mortgage renegotiation is to adapt the conditions of the mortgage loan to the borrower’s financial situation and current market conditions, ensuring greater flexibility and economic sustainability.
How to identify a floor clause in the mortgage?
Many people ask themselves “floor clause: how to know if I have one“. If you have noticed that your mortgage payment at a variable rate has not changed significantly since 2008, it is possible that you have a floor clause. To confirm this, it is advisable to carry out a detailed review of your mortgage contract.
When examining your loan deed, pay particular attention to terms such as “mortgage floor”, “interest rate corridor” or “interest rate cap”, as these concepts often indicate the existence of a floor clause. It is important to look for mention of a “minimum interest rate” or any reference to a lower limit on interest rates. A floor clause usually appears as a provision that sets a minimum interest rate, regardless of fluctuations in the benchmark index (such as Euribor).
Often, it can be difficult to interpret the terms of a contract or you may have doubts about the presence of unfair terms. Therefore, it is best to seek legal advice from a lawyer with expertise in banking law and mortgage who can analyse your mortgage, identify potentially unfair terms and guide you through the claims process if necessary.
Who can claim for the floor clause in your mortgage?
If you have signed a mortgage loan, whether it is current or has been cancelled, you may have the right to claim for the floor clause. This right remains even if you no longer own your home or if your mortgage is many years old. However, in order to be able to claim, you must meet certain legal requirements:
- Be a consumer: i.e. you must be a natural person who took out the mortgage loan for private purposes, such as the purchase, construction or renovation of a home, and not for business or professional activities.
- Lack of transparency: the bank must have incurred in a lack of clarity when including the floor clause in the contract. This can manifest itself in the following ways:
- Failure to provide clear information on how the minimum interest rate would affect your mortgage.
- Omitting the floor clause in the binding offer or in the pre-contract documentation.
There is a clear disproportion between the “floor” (minimum applicable interest rate) and the “ceiling” (maximum allowed interest rate), which creates an unbalanced situation to the detriment of the consumer.
What documentation do you need to claim the return of the floor clause?
In order to start a claim process for the floor clause or for mortgage expenses, it is necessary to collect all the documentation related to the formalisation of your mortgage so that the bank or the court can analyse your case and determine whether or not you should be reimbursed. Make sure you have:
- Copy of the mortgage deed: this document is essential, as it details the conditions of the contract, including the possible existence of a floor clause.
- Invoices related to the costs of setting up the mortgage: collect all the invoices issued when you formalise your mortgage loan, such as:
- Notary’s invoice for the constitution of the mortgage.
- Invoice from the agency that processed the documents.
- Invoice from the Land Registry for the registration of the loan.
- Invoice of the valuation of the property, essential for the granting of the mortgage.
Having this documentation in order will facilitate the claims process and increase your chances of mortgage renegotiation, either by renegotiating directly with the bank or by taking your case to court. To maximise your options, consider enlisting the support of mortgage lawyers who can help you gather this documentation and guide you through the process to effectively represent your interests.
How to claim the nullity of a floor clause
There are two main ways to claim the nullity of a floor clause: extrajudicial and judicial. The out-of-court route is generally the most advisable and starts with a direct complaint to the bank.
According to Royal Decree-Law 1/2017, banks are obliged to inform their customers about this free procedure and have a period of 3 months to respond and, if necessary, return the corresponding amount. If this route is not satisfactory, you can opt for the judicial route, which involves filing a lawsuit before a court of first instance.
This process is longer and involves considerable costs, but it can result in the removal of the floor clause from your contract and the return of the amounts unduly charged if the judgement is favourable. Given the complexity of these processes, it is best in this case to contact a floor clause lawyer before taking any legal action.
How to renegotiate a mortgage?
Here is a step-by-step summary of how you can proceed to renegotiate your mortgage, following the key steps mentioned throughout this article:
The first thing to do is to identify whether your mortgage includes a floor clause. These are usually reflected in the general conditions of the contract, where a minimum limit for the variable interest rate is indicated, regardless of the evolution of the Euribor.
Before negotiating with the bank, it is highly advisable to have professional advice. For example, at BUFET GÓMEZ FERRÉ, we specialise in floor clauses and offer a free initial assessment of your case.
Our lawyers will analyse your mortgage contract in detail to identify possible unfair floor clauses and, based on this analysis, prepare a favourable strategy to renegotiate your mortgage and protect your financial interests with the utmost confidentiality.
The next step is to make a formal complaint to the bank requesting the removal of the floor clause or its replacement with more favourable conditions, such as a variable interest rate without limitations. This step is part of the out-of-court process recommended in many cases to resolve the conflict in a quicker and cheaper way.
If the bank does not offer satisfactory solutions, you can opt for a novation of the contract or a subrogation to another bank that offers better conditions. Both alternatives may involve associated costs, but in the long run they usually represent considerable savings if abusive mortgage clauses are eliminated.
During the renegotiation, you can also take the opportunity to review other terms, such as:
- Mortgage insurance
- Repayment period
- Associated interest rates
Once an agreement has been reached, it must be documented and signed before a notary to ensure that it is legally valid and that the changes are officially reflected in the contract and that the bank cannot unilaterally change the new conditions.
Frequently Asked Questions
A floor clause is a provision included in some mortgage contracts that sets a minimum limit on the variable interest rate of a mortgage. This clause prevents repayments from being reduced when the reference rate (usually Euribor) falls below a certain percentage. For example, if your mortgage has a floor clause of 3%, even if the Euribor plus the spread results in an interest rate of 2%, you will still pay 3%.
Many floor clauses have been declared abusive due to lack of transparency in their marketing, which has led to numerous claims and court rulings in favour of consumers. If you suspect that your mortgage contains a floor clause, it is advisable to review your contract and consider seeking out mortgage and banking lawyers specialised in floor clauses to evaluate your options for claiming or renegotiating them.
Euribor is a benchmark index used to calculate interest on variable rate mortgages. When your mortgage is reviewed, the new interest rate is obtained by adding the Euribor value to a fixed spread agreed with your bank.
The fluctuations of the Euribor directly affect your mortgage payments: if it rises, your payment will increase at the next review; if it falls, your payment could decrease, provided that there is no floor clause in your contract.
The legality of floor clauses in Spain has been the subject of intense legal debate. Currently, these clauses are considered abusive and null and void when they have not been presented with sufficient transparency by the bank. It should be borne in mind that the validity of a floor clause depends on its wording and how it was explained to the borrower at the time of contracting.
If you signed a mortgage contract before 2013, you may be entitled to claim, as it was in that year that these clauses began to be more strictly regulated. To identify whether your mortgage contains a potentially unfair floor clause, look in your contract for terms such as the ones mentioned above: “minimum interest rate“, “mortgage floor“, or “minimum interest rate cap” and other equivalent terms.
Given the complexity of this issue, we strongly recommend that you consult a lawyer specialised in banking law to help you identify them and, if appropriate, initiate a claim process.
Yes, it is possible. Many banks have agreed to remove these clauses through direct negotiation or after filing a formal complaint. However, the bank may ask for concessions in return, so it is important to negotiate carefully.
If you are considering taking out a new mortgage, you can rest assured that since 2013, Spanish legislation has prohibited the application of these clauses in mortgage loans, which means that current variable mortgages cannot establish downward limits on interest rates. In addition, the Mortgage Law 5/2019, in force since June 2019, has introduced an important novelty: it establishes a mortgage floor of 0% by default.
This provision applies only in exceptional situations where the sum of Euribor and the customer’s spread would result in a negative interest rate, thus ensuring that the bank does not have to pay interest to the borrower, but guaranteeing that you do not pay more than the borrowed capital in case of extremely low interest rates.
Opting for lawyers specialised in floor clauses, such as our BUFET GÓMEZ FERRÉ, can make the difference in the process of renegotiating your mortgage.
As professionals in banking law, in addition to claims for unpaid debts and claims against administrators, among other specialities, we have in-depth knowledge of mortgage and banking claims, as well as extensive experience in the identification and elimination of abusive clauses.
By choosing expert lawyers in Barcelona to remove floor clauses, you ensure you have a team that understands the legal complexities and latest case law relating to mortgages and floor clauses. As specialist mortgage lawyers, we can offer you personalised strategies to renegotiate your mortgage loan, maximising your chances of success and saving you a substantial amount of money in the long run.
Our experience in banking law allows us to:
- Thoroughly analyse your mortgage contract to identify all potentially abusive clauses.
- Develop a sound negotiation strategy based on existing legislation and recent case law.
- Represent you effectively against the bank, protecting your interests at all times.
- Advise you on the best options for your particular case, either through out-of-court negotiation or, if necessary, through the courts.
Free lawyer consultation – Lawyers specialising in floor clauses and mortgage renegotiation
Consult a free lawyer and ensure the enforcement of your rights with the support of professionals in Banking Law.
At BUFET GÓMEZ FERRÉ we are a team of lawyers specialised in floor clauses and mortgages in Barcelona, ready to help you improve the conditions of your mortgage loan, offering you a free initial assessment to review your case. Our work model is also based on the quality of lawyers to result, which allows us to adjust our fees to the success of the claim.
Contact our law firm in Barcelona and we will help you through the whole process to eliminate abusive floor clauses, with the aim of looking after your interests and achieving your best benefit.
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