How are mortgage reviews carried out?
A mortgage review refers to updating the value of the benchmark on which the mortgage is based. In other words, a mortgage review consists in recalculating the interest on the mortgage to adapt it to current market conditions and establish the amount of the new instalments based on this interest.
Mortgage reviews only apply to mixed mortgages and variable-rate mortgages.
The Euribor is the benchmark index used for most mortgages in Spain to calculate the interest on mixed and variable-rate mortgages. The mortgage instalment will go up or down depending on the fluctuations in the benchmark.
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When are mortgages reviewed?
Mortgages are usually reviewed annually or half-yearly, although this may vary according to the provisions of the mortgage agreement.
The review establishes the instalment that will be payable until the next review.
How is the mortgage review calculated?
The mortgage review takes into account the following elements:
- The updated value of the Euribor: depending on the stipulations in the agreement, the value of the month prior to review will be taken into account, and sometimes even the values of two or three months earlier. Banco de España publishes the value of the mortgage Euribor in the BOE [Official State Gazette) at the beginning of every month.
- The spread applied by the bank.
- The amount that remains to be repaid.
- The time remaining until the end of the mortgage term.
Can the mortgage review period be changed?
Some banks allow you to change the mortgage review period from annual to half-yearly or vice versa.
But remember, this change will imply a novation of your mortgage and will therefore involve certain expenses.