Mortgages in Spain

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Some banks have special mortgages designed for non-resident borrowers.

Besides the cost of the opening mortgage commissions, several additional costs must be taken into account.

Mortgages in Spain

Currently, Spanish banks offer a varied array of loaning facilities. Some banks have special products designed for non-resident borrowers, others simply adapt the existing types to the purchasers´ personal circumstances. Although mortgages are readily available from Spanish Banks, obtaining competitive conditions for the mortgage is a task which deserves some investment 

in time and patience.
Very few potential borrowers ignore that banks are money makers and that they will most certainly offer you for a start the less attractive conditions for mortgages (interest rates, indexes, opening commissions, redemption penalties etc.). A well informed customer is in a position to negotiate and improve the conditions of the mortgages offered, by exposing the bank's higher interest rates, higher commissions or inadequate indexes in comparison to other banks, since they want to keep their customers, not lose them. Never forget there are many banks around willing to improve, even by a fraction, that interest rate you are contesting.

What is the best type of mortgage?
It is important to be able to compare the value for money of all the different mortgage products. There are many ways in which interest can be calculated and repayments made. For example, interest can be charged by reference to days, months, quarters or years and repayments can be made at varying intervals, making it difficult for comparisons to be made between the terms offered on various loans. To overcome this problem the TAE (TASA ANUAL DE EQUIVALENCIA) or APR in English can used to compare loan offers.

The TAE is the interest rate which represents the total charge for credit and takes into account the added costs of the loan, such as valuation fees, opening commissions and lenders' conveyance charges, which are not included in the nominal rate. Although the TAE is based on the gross rate of interest, they offer a means of comparing the cost of different loans.
Caution, however, should be exercised in relying on the TAE as a means of comparing different mortgages, particularly if you are trying to compare a fixed or discounted rate with a standard rate. This is because the TAE on the fixed/discounted rate may only apply to the initial cheap rate period; it does not necessarily take into account the fact that the rate will change after the initial fixed/discounted rate period has elapsed.

How should I repay it?
Most of the Spanish lenders require repayments to be on a monthly basis. There is nothing stopping a bank from altering the repayment schedule to suit the borrower (e.g. his pay is based on quarterly commissions).
Other banks allow the borrower to stall repayments of the capital until a future date, the repayment consisting in interest only. 

This flexibility varies from one lender to another.

Can I make lump sum payments to reduce the size of the loan?
This possibility is available in all banks. In fact, lenders are not allowed to preclude the borrower from doing so, since this attitude would invariably be construed as being against the basic rights of the consumer under the powerful consumers´ legislation.
Most of the lenders will nonetheless charge a redemption penalty for lump sum payments ranging from 1% to 1.5 %, going up to 4% of the capital borrowed on a fixed interest rate loan offered by some entities.

Are there any redemption penalties?
Redemption penalties (known in Spain as early repayment commissions) are applied by almost all banks. These vary between those applied to variable interest rate loans and fixed ones. A decision of early repayment can result in being whacked with a whopping 4% redemption fee in fixed interest rate loans with some lenders. Too many pesetas to be paid to get out of a mortgage.

Do mortgages come with compulsory insurance?
Any entity will charge a premium to insure the property against adverse occurrences. This is understandable in-as-much as the mortgage is secured by the market value of the property. However, lending entities have now started to impose on borrowers the obligation of taking out life insurances. 

The Information Provided on this page is Generic and for General Guidance Only

While we endeavour to provide accurate information - the subjects of Spanish Property, Immigration Laws and Taxes is complex and subject to change - ALWAYS consult a Lawyer before proceeding with any Legal Contract or Move