How do mortgage loans work for buying a house in Spain?
A mortgage is a financial product in which the customer requests a certain amount of money from the bank to buy a home with the condition and commitment to return the money borrowed in instalments over a certain period of time. The main difference between a mortgage and another type of loan is that the guarantee is the home that is being financed.
Mortgage repayments or instalments are calculated according to the following factors:
- The mortgage amount.
- The repayment period.
- The interest rate applied.
- The mortgage type.
All these factors shape the conditions of the mortgage and are specified in the mortgage agreement, which is one of the most important documents when taking out a mortgage loan in Spain to finance the purchase of a home.
As well as the conditions and obligations, this document includes the following:
- Repayment terms.
- Month-to-month repayment plan.
- Type of instalment (fixed, variable or mixed).
- Mortgage expenses, which vary according to the region of Spain where you want to buy your home.
What types of mortgages are there in Spain?
In Spain there are three types of mortgages and Bankinter provides all of them. These are their characteristics and the differences between them:
- Fixed-rate mortgage
The mortgage that gives you the peace of mind of always paying the same amount. The monthly instalment and interest rate are fixed throughout the life of the mortgage, month after month, year after year. This mortgage is designed for borrowers with a monthly income of at least €2,000 and finances a maximum of 60% of the purchase price or appraisal value, whichever is the lowest.
- Variable-rate mortgage
This is the classic type of mortgage. You decide the amount you need to buy your house and the repayment period. Variable-rate mortgages are referenced to the Euribor (with annual reviews) plus a spread. The Euribor is one of the official benchmark rates for the mortgage market and is published every month by Banco de España.
- Mixed-rate mortgages
A mortgage that combines fixed and mixed. During the first years the interest is fixed, and you know the exact amount of your instalments. After this period and until the end of the mortgage, the interest rate is variable. It applies for the purchase of a new home or for a mortgage on the primary residence.