Real estate financing

A couple contracted a reverse mortgage in 2010, a secured loan with their home. After the death of both , their four children took the matter to court. They wanted the contract to be annulled and questioned, among other things, how the interests were calculated. The defendant entity was Kutxabank.

The main conflict was in a clause that established a fixed interest of 6.50% per annum during the credit drawdown period. The problem was not only that percentage, but that the interests were added to the debt and, afterwards, could generate new interests. Simply put, the debt also grew due to the accrued interests . The Provincial Court had already annulled that method of calculation but had maintained the fixed interest.

The Supreme Court (TS) goes a step further. It considers that the clause did not explain with sufficient clarity how the interests would end up being calculated and that, once declared abusive , the judge could not cut it back to keep the part that set the 6.50%. Therefore, it nullifies the clause as it establishes the remunerative interest . The result is that the loan remains without that interest. This does not mean that the entire reverse mortgage is annulled nor that the TS considers abusive the 6.50% simply because of its amount.

Kutxabank will have to return the amounts that have been paid for that concept, if any, plus the legal interests from the date of each payment. The TS does not set a specific return amount.

The children, however, do not achieve the annulment of the entire contract. The TS explains that they did not have to give permission for their parents to sign it and that it was also not proven that they contracted due to a sufficient error to invalidate it. Thus, the claim succeeds regarding the interests, but not regarding the validity of the contract as a whole.