We have helped many people who have suffered financial loss through floor rate mortgage clauses. These clauses limit the variability of the mortgage loan interest, and with our help these clients have been compensated and recovered the interests overpaid.
However, we have noticed that offers made by the banks, as well as the claims presented on behalf of the consumers, do not always include all the damages which we understand could be claimed for.
We understand that the consequence of declaring a mortgage floor clause null should be as if it had never existed, the whole mortgage must be recalculated. The replacing of the floor clause with a lower interest rate will not only mean that an interest has been overpaid, but also that there should be a possibility of claiming for the interest lost on these over payments, plus, a lower interest rate influences the % of each monthly payment that is allocated to paying off the pending capital amount.
To consider an example: A loan of € 250,000, for 20 years (240 months), with an interest rate of 1% and 3% floor clause.
.- With the 3% floor rate clause, if we claim in year 15 (the monthly payment number 180), up to that date the interest paid would be 76.730,58 €, and the outstanding capital – principal to be paid off still, would be 77,161 , 66 €.
.-Without the clause floor, we would have been paid an interest of 1%.
Some banks and claims would say, as we have paid 3% and we should have paid 1%, we are entitled to get 2/3 of the interest paid back, so we could claim for = 51.153,66 €
But in reality, we are entitled to the entire loan, interest, etc. to be recalculated as per the correct interest, ie 1%, without the mortgage floor rate clause, meaning the interest up to that date, using the example shown above, should have been only 24,213.08€, and the outstanding capital to be paid off would have been reduced to 66.166,92€.
So we understand that in this claim we have the right to:
.-Get back the overpaid interest = 52.517,50 €.
.-Get paid legal interest on the overpaid interest amount.
.-Get a reduction on the outstanding capital of the mortgage to be paid, of 10.994,74 €.
Therefore, the benefit of the claim would not be 51.153,66 €, as per the first calculation, but in fact should be 63.512,24 € plus legal interest, as per the second calculation.
If your loan has a mortgage floor clause, and although your bank no longer use it, you should know that you can claim to be declared null and void, if you were not properly informed about it, and you can claim for interest overpaid, interest on those interests, and the recalculation and reduction of the outstanding capital that remains to be paid. Make sure that you claim for the correct amount. Contact us and we’ll help.
The information provided in this article is not intended to be legal advice, but merely conveys information related to legal issues.
Carlos Baos (Lawyer)
Spanish Law firm solicitor attorney barrister.
Alicante, Denia, Costa Blanca Marina Alta
White & Baos 2016 – All rights reserved
