Since the decree of the State of Alarm in our country on 14 March, the Government has implemented a series of urgent and extraordinary measures to try to alleviate the economic consequences that businesses and self-employed people are suffering as a result of COVID-19. Undoubtedly, one of the most prominent has been the mortgage moratorium.
The aim of the mortgage moratorium is to provide support to vulnerable businesses and self-employed persons caused by the coronavirus crisis; facilitating access to liquidity to prevent the loss of premises, establishments or facilities; among others.
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What is the COVID-19 mortgage moratorium?
The mortgage moratorium is an extraordinary measure taken by the Government to try to alleviate the economic burden of vulnerable companies and self-employed persons,temporarily suspending the different contractual obligations they must meet.
In the case of companies and self-employed persons, this moratorium appliesto the payment of mortgage fees for real estate affected by economic activity, thus avoiding a possible loss of their business.
If the requirements for applying for this moratorium are met, the mortgage debt will be suspended for aperiod of three months, as well as the other concepts that make up it (interest payment, capital depreciation,… etc.), neither entirely nor in a percentage.
After the three-month period, a re-extension of the suspension by Agreement of the Council of Ministers could be requested.
After that time, the mortgage debt payment will be reactivated,and the duration of the loan will be extended, the same period of time that the suspension has lasted.
In addition, during the moratorium, the loan may not be resolvedin advance, nor may it accrue ordinary interest or delay.
Requirements for applying for a mortgage moratorium
The main requirement to apply for the mortgage moratorium is to be an employer or self-employed person in a situation of economic vulnerability due to the impact of COVID-19,who must also be the principal debtor, or other than, guarantor or principal guarantor of the debtor.
With a situation of vulnerability we mean those businesses that have had a fall in revenue by at least 40%. In addition, the default on mortgage loans could also be requested if the total mortgage fees affect the moratorium, plus basic expenses and supplies, is equal to or greater than 35% of net income.
In order to demonstrate such a situation of economic vulnerability, the applicant shall make a responsible statement including the express justification for the reasons,which must be directly related to the consequences experienced by the coronavirus, and which prevent compliance with the corresponding mortgage payments.
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What is the deadline for applying for the mortgage loan moratorium?
If the relevant requirements are met, there will be a 15 days after the end ofthe State of Alarm to request the moratorium, and for this you will have to submit the form of Application for Moratorium and Responsible Declaration signed, including all economic data and relevant documentation required.
How long does it take for the mortgage moratorium to apply?
The mortgage moratorium will be effective at the time the Responsible Statement is filed,but will apply for the following month. This means that if, for example, you made the application on May 4, the fee that will not be paid will be the one in June.
In general, most banks have a maximum period of 15 days to implement the statutory mortgage moratorium,from the effective date of the application, provided that the situations occur and the relevant vulnerability requirements are met.
In short, if you are an entrepreneur and self-employed worker in financial vulnerability because of the effects of the coronavirus, you can apply for a mortgage moratorium, suspending the payment of mortgage loans for three months.
If you have any questions about the application or are not sure you are sure to meet the necessary requirements, please contact our tax and accounting advisors at AYCE Laborytax and we will provide you with all the information you need to know.