Basic mortgage questions
 

Hi forum.

I have couple of questions regarding general mortgage conditions in Spanish banks.

First of all I have to admit that it is not very easy to find relevant information on major bank's websites.
I thought that writing email is fine, but they provide weird forms where you have to enter phone number, some kind of a NIF number and things like that. I just wanted to ask couple of very simple things =) Anyway, I managed to send couple of these forms, but maybe you can help me faster.

I do not live in Spain yet, but planning the move. If all goes fine, I will think about permanent home and therefore will take mortgage. Of course, exact interest % and things like that are decided by bank on a private basis.

What I planned to find out is the following (and normally should be regulated by law):

1. Interest consists of Euribor + bank's %.
Will Euribor part be as low as it can be? I was a bit surprised to know from the Google that there were cases where banks "have freezed" Euribor on a higher level despite it fell significantly :blink:

2. Can bank change their % of the interest at discretion?

3. Can I make repayments and if yes, how much can it cost?
For example, I take a mortgage for 30 years, so that my monthly payments are quite low. But at the same time if I have some extra money, I gather them once a year and send to the bank to reduce the body of the mortgage step by step.

I bet some forum members have taken mortgages from the Spanish banks and can explain me these specifics.

Thanks you!

Re: Basic mortgage questions
 

I had a mortgage and similar to yourself planned to pay it off early.

My mortgage was with Cajamar and they assessed the interest rate annually I think January it then stayed the same until the following year.

When you pay off parts of the mortgage there is a charge % of loan set at time of taking out the mortgage. This includes if you wish to pay the mortgage off in total which I did. The lady at the bank advised me to pay off most of mortgage but leave say 2 payments to pay that way I would save in the region of 1500 Euros. I followed her advice and did save that amount. I do find with my bank that the staff are very good at advising you.

Just to clarify in my case the mortgage stated that to make a payment as part payment % rate was less than should you make total payment early.

Re: Basic mortgage questions
 

Hi bobd22

Thanks for a quick reply!

Do you remeber what part of the interest changed? If it was Euribor, then it is normal, but if bank's part of the interest, then this is frightening as they can change it as much as they want..

Maybe you also remember, what % was to pay part of the remaining mortgage body? Maybe 0.5%, 1%, 2%? Just to have an overall overview..

Re: Basic mortgage questions
 

Check the level of interest if the mortgage falls into arrears, it can be as high as 25%.

Re: Basic mortgage questions
 

hi, guirijohn! What do you mean by 25%?? 25% from the amount I want to pay extra? That's kinda robbery.

Re: Basic mortgage questions
 

No, I am referring to the situation where the mortgage payments fall into arrears. The is usually a clause that allows the lender to charge a penalty rate of interest. It is a question of reading the small print. Hopefully it would never happen, but it can be a rapidly downward spiral for borrowers who lose their jobs, or who fall ill.

Re: Basic mortgage questions
 

Ah, sorry, now I got the point. Yes, this is also worth checking, but pretty sure that every bank globally has some kind of a penalty for not paying in time.

Re: Basic mortgage questions
 

Yes it was the Euribor bit that changed they assessed that around january and that set it for next 12 months. The actual interest charged was Euriobor plus a % seem to think it was Euribor plus 2 or 2 1/2 %? I do seem to remember it going down as well not always up

Re: Basic mortgage questions
 

I will see if I have the actual papers available later and give you full figures

Re: Basic mortgage questions
 

I have a mortgage with what was once Halifax ==> Lloyds ==> Sabadell. It is based on the MONTHLY Eurobor and not the annual one. The benefits are that if the Eurobor is on a downward trend, then I see the benefit every month of course the opposite is also true.

I currently pay 1.1% (bank bit) plus 0.12% (monthly eurobor rate).

The other benefit which I insisted upon when I took out the mortgage is that I can pay any of the capital off (but no less that 1000e in any one go) without penalty.

Re: Basic mortgage questions
 

Not all mortgages are based on Euribor. Some banks use the official average rate that banks actually charge - this is published every month by the bank of Spain and it is well above Euribor.

Most mortgages have a minimum interest rate so that even if the official rate drops to zero they still charge the minimum rate.

It's an absolute minefield and you may well find it very difficult to get any sort of mortgage at present. I read recently that 93% of all requests for loans are rejected.

Best of luck!

Re: Basic mortgage questions
 

Sorry can't find details I was looking for. As said there are a variety of different mortgages ours was as said Euribor + % set in January and stayed that way untill following january when it may go up or down dependant on Euribor bank percentage stays same, positives and negatives for that as has been mentioned. You could pay off an extra amount min 1000 Euro up to full amount outstanding but there was a small% charge, if it was full amount percentage goes up slightly.
One other point with Spanish mortgage once you have paid it off you have to get the deed changed to remove bank unlike the UK this is not done free of charge costs around 800 - 1200 Euro!

Re: Basic mortgage questions
 

Presumably you can ignore that until you wish to sell the house and do it then or would there be a problem with this?

Re: Basic mortgage questions
 

Not sure on that Fred very possibly but I got it done and out of the way as bank kept mentioning that it should be done.

Re: Basic mortgage questions
 

The price might have gone up by then! I got the deed of cancellation for my mortgage done as soon as we paid it off.

Re: Basic mortgage questions
 

Yes Lynn good point. In UK you just get a letter saying Bank etc have informed Land Registry they no longer have an interest no cost whatsoever. I mentioned it as OP may not be aware

Re: Basic mortgage questions
 

It is outrageous!

They charge 1% up front on the mortgage as a tax and another 1% to get rid of it after you have paid it off!

I understand that they even charge 1% tax on car finance deals!

Still - take it or leave it - that's what you have to pay to live in Spain.

Re: Basic mortgage questions
 

Hi, bobd22, anyway, thanks very much for your help.
Paying bank the whole 1k euro in the end just for nothing sounds weird, tbh. How do they explain it? What do you pay for actually?

Hi snikpoh! The greatest benefit of monthly Euribor is that it is always lower than yearly one =) 1m < 3m < 6m < 12m

You have a very good % and no fees for repayment! I will take a note of Sabadell, thanks. If I might ask, when did you take your mortgage? I am afraid, they can probably be much greedier now =)

Fred James, I'll try to avoid those which have some minimum % as this is kind of unfair, looking at current Euribor rates. And of course, they don't have maximum %, do they? =)
Thanks for advice! If I decide to go for a mortgage, then hopefully one of the "good" banks approves me.

Re: Basic mortgage questions
 

Quite simply you are paying including legal fees (never cheap in Spain) to have the banks interest in your property removed from the deeds. It may be as Fred says you dont really need to do it unless selling. but they did tell me it should be done. It also as always in Spain has to go through the Notary. Bank or solicitor can do it but Bank is cheaper.

Re: Basic mortgage questions
 

I took it out over 7 years ago - things have changed greatly since then.

I'm not sure what you mean by "1m < 3m < 6m < 12m" - why should that be the case?

Re: Basic mortgage questions
 

bobd22, thanks, perfect robbery of people..

snikpoh, oh yes, 7 years ago things were much brighter. Any idea if similar conditions still in place anywhere?

Regarding Euribor: this is intress on which European Central Bank gives money to the local banks. 3m, 6m etc is the period of this loan. The shorter it is, the smaller intress.

If you check current rates, you can see that 1m Euribor is lower than 3m and so on. http://www.euribor-rates.eu/current-euribor-rates.asp

Re: Basic mortgage questions
 

[QUOTE=Alicante17;10972445]bobd22, thanks, perfect robbery of people..

Yes wouldn't argue with that view, but that's Spain I suppose:sneaky:

Re: Basic mortgage questions
 

Yes, for obvious reasons most people don't bother doing this, and it gets forgotton about until they try to sell and it comes up on the nota smple. Stage 1 in becoming integrated into Spanish life is learning to hate Hacienda, stage 2 is learning to hate the Spanish banks ;). Their only defence is that these charges were first implemented a long time when mortgages were relatively small, paid off in 10 years maybe. Of course when mortgages went up to 30 or even 50 years they made no effort to reduce the charges correspondingly, so now people can end up paying thousands of euros for someone to press a button somewhere.

Re: Basic mortgage questions
 

Might be of interest for those here that have a mortgage, I had this from a Spanish friend. I know zilch about it, but according to him you can renegotiate a good rate at the moment.

Re: Basic mortgage questions
 

During many years of working in the world of finance I never met anyone who read every word of the small print on the mortgage offer. I actually received a phone call from a guy, many years after arranging his mortgage, he couldn't thank me enough for selecting a 1.0% above BOEBR scheme, I never gave it a thought at the time of sorting the forms out, the possibllity of a 0.50% BOEBR was not even worth mentioning, or so I thought. :eek:

I would advise, painful as it might be, to read every word of the small print, make notes of anything that you don't understand and then ask the broker/bank adviser to explain them. Everything involving Spanish property, other than the actual property price, appears mega expensive to me, so I shan't get into that.

Re: Basic mortgage questions
 

Sorry but is your friend saying there are mortgages out there that are fixed at 2.75% for the life of the loan?

Re: Basic mortgage questions
 

Not sure, what I quoted is what he said, as I don't want a mortgage, I didn't ask any further details. He's a journalist, lives in Galicia, currently lecturing in Finland, so I imagine he's pretty switched on.

Re: Basic mortgage questions
 

I can imagine them being euribor + 2.75%, but not fixed at 2.75%. If that were the case then I'd be buying.

Re: Basic mortgage questions
 

You're probably right, I've no idea, long time since I've had a mortgage. ;)