REDAL mortgages: do they have a reserve requirement in Spain?

19 Feb 2024 | Blog

For some time now, the so-called REDAL mortgages have begun to become popular in Spain, that is, alternative loans that do not have a specific repayment system and which, as indicated by their Latin origin (reditio ad libitum) are, in essence, a repayment of the loan and payment of interest at will.

Given the increase in inquiries and requests for this type of mortgage loans, the director of the Legal Department of Tecnotramit, David Viladecans Jiménez, carries out the following analysis and assessment in this regard:

  • “The litigation brought on the basis of this approach has mostly resulted in the dismissal of claims for annulment and/or failure to fulfil obligations. And, while it is true that there were two initial favorable pronouncements in 2021, the truth is that little by little the dismissive pronouncements were imposed.”
  • “It is very difficult to accept that in our legal system there is room for a system that pretends that the debtor can repay the loan and pay the interest at convenience. Obviously, this clashes head-on with one of the essential principles that govern our law of obligations.”
  • “Mortgage loans must meet a series of requirements in terms of sectoral regulations and by reason of the mortgage, without it being possible for the instalment and repayment period to be indeterminate. In fact, the REDAL system poses a real indeterminability, which would make mortgages unenforceable. In addition, this system lacks regulatory support and is not financially recognized.”
  • “Without prejudice to what the future will bring, it can be concluded that, at present, the challenges of mortgage loans due to indeterminability of the installment are failing and REDAL mortgages do not fit into our legal system.”
  • “What is relevant in this type of procedure is to assess whether the clauses of the deed establish the elements to determine the amount of principal and interest to be paid each month. And, despite the fact that there is no specific formula for determining the quota, if there are sufficient elements of the set of clauses for its determination, this is sufficient, since the determination of the quota results from a mathematical operation that differentiates what corresponds to capital and what corresponds to interest”.