Spanish Mortgage Rates
Before you apply for a mortgage in Spain it is necessary to understand the interest rates in Spain. These are different compared with other countries.
The characteristics of the mortgage interest rate in Spain
- most mortgages in Spain are contracted with a variable rate.
- variable interest rates are determined on the basis of the Euribor plus a margin.
- The rate above Euribor depends on several factors, such as the number of by-products that are contracted. Another issue is whether you are liable to taxes as a resident in Spain.
- The revision of the Euribor occurs every 12 months. Spanish banks do not offer a 1, 3 or 6 month interest revision.
- A mix of fixed and variable rates is also a possibility. During the first years of the mortgage, the rate is fixed – after which it will automatically change to a variable rate. This is called a `hipoteca – mixta’. This form is currently not used much anymore.
- The most common form of mortgage interest rate in Spain is the fixed rate period with a fixed term. For example: A fixed rate period of 15 years also has a term of 15 years. The mortgage type is a repayment mortgage and after 15 years your loan has been paid. The term is linked with your age.
- The fixed and variable mortgage rate in Spain have a penalty for early repayment. When you repay early during the first 5 years you pay a 0,5% penalty on the amount to be repaid. After this period the penalty is lowered to 0,25%. At a fixed rate period you must take into account a penalty rate of maximum 2,5%, which is calculated only when the bank loses money from early repayment of the loan.
Do you want to know which rates apply to your situation?
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Fixed or variable interest rate for your Spanish mortgage?
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Mortgage interest rate Spain – Improve or refinance your mortgage?
One of the advantages of a variable rate is that you benefit from interim decreases in interest rates. When mortgage rates are incredibly low it may be advantageous to fix the interest rate. There are two ways to improve the conditions of your mortgage in Spain: through a ‘renewal’ or by ‘refinancing’.
Unlike refinancing, a renewal negotiates the existing conditions at the same bank where the mortgage was originally contracted. A renewal may entail, in addition to changes of the interest rate, amendments in the conditions of the contract. Read more
If a bank is not willing to negotiate in your favor with regards to the rate or conditions, you can choose to refinance your mortgage with a different bank. The aim of refinancing is to improve the interest rate of your Spanish mortgage. The current mortgage will be ‘replaced’ by the new mortgage. The current mortgage is cancelled and a new mortgage deed with new conditions will be drafted. Read more
WeCare Mortgages helps you
Before deciding to renew or refinance your mortgage it is wise to know exactly what the costs are. We will give you a clear financial overview so you know where you stand. We have been negotiating with Spanish banks for years, understand how they work, and know exactly how to negotiate in your favour. This is good to know.
Would you like to know your options? We are happy to complete a Mortgage Quick Scan for you.
Mortgage rate Spain – Interest rate floor or tunnel clause
Although the Euribor has been very low for several years, there are still people who pay high interest rates. That is because the banks once included a so-called interest rate “floor” in the contract. This placed a minimum limit to the interest rate, thereby leaving mortgage holders with no advantage of the falling interest rates.
Fortunately, there is good news: in December 2016 the European Court declared the interest rate “floor” clause invalid. Banks must now repay all excess amounts paid on interest to the mortgage holders.
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