LDT SPANISH MORTGAGES & LEGAL SUPPORT
MORTGAGE PRODUCT TYPES SPAIN
What Spanish mortgage options are available.
Repayment Mortgages.
Most loans in Spain are of a repayment nature. Terms between 25 years to 30 years are standard with maximum age by which the loan must be repaid being 75 years. Many lenders are reducing maximum ages and it is anticipated these will fall in general to retirement age over the next few years. The loans are predominately variable trackers and track either the 12 month Euribor or the IRPH which is a rather obscure Spanish bank rate. Loans tracking the 12 month Euribor are reviewed once a year and adjusted against that months published prevailing Euribor for completions and revisions. The margin above the Euribor for repayment loans remains static for the lifetime of the loan. Overpayments are allowable by law and maximum early repayment charges for a repayment loan are 0.50% in first 5 years and 0.25% thereafter. Most Banks apply the maximum by law for both full and partial overpayments. Regular monthly overpayments are not an option as the loan is only reviewed each 12 months so any overpayments would be made by way of a lump sum, payment just before the normal annual review.
Interest only Mortgages.
Interest only once readily available in Spain for a limited term has now disappeared from the market. In some rare circumstances and on a case by case basis the Spanish Banks may still consider a very short term of interest only between 6 to 12 months. To obtain this facility rationale as to why it was required would need to be presented and agreed. A few banks who still offer construction or self build mortgages will allow the payments to be interest only during the construction period up to a maximum of 2 years.
Fixed rate mortgages.
Fixed rate mortgages are available. There are two types of fixed rates in Spain, those where the rate is fixed for the term of the mortgage and those where the rate is fixed for a specific length of time and reverts to variable when the fixed rate expires. Fixed rates in Spain are always at much higher rates than the prevailing variable. Fewer than 10% of all loans completed in any given year are on a fixed rate basis as traditionally variable rates are the preferred choice of the Spanish Banks.Fixed rate options range from between 3 years to 20 years. Fixed rates cannot be secured at application as would be normal in the UK but are the fixed rate available at offer as designated on the FIPER. Because fixed rates change on a regular basis what is applied for is rarely what finally is offered. If a client applies and has underwritten a loan on a fixed rate basis and when the offer comes through decides not to progress on a fixed rate basis the whole application must be reloaded and underwritten again. Early repayment charges when relating to a fixed rate product can be as high as 2.5% plus the normal 0.50% or 0.25% after year 5 and the 2.5% can apply for the lifetime of the loan.
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