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Mortgages
Technically speaking, a mortgage loan is the same as any other bank credit, with one significant exception: the warranty provided to guarantee repayment of the loan is the mortgaged property itself, meaning that if the borrower is unable to pay off the credit, the bank is entitled to foreclose the mortgage and assume ownership of the property.
It is, therefore, extremely important that we pay close attention to the clauses contained in our mortgage contract, especially those dealing with:
- Loan capital: amount of money we receive from the banking entity.
- Amortisation: period of time agreed upon within which to repay the loan amount. It must contain the number of payments to be made, the amount they involve and, if the interest is variable, the initial rate applied
- Interest: here the rate of interest to be applied shall have to be specified together with the review procedures in the event of it being variable. The contract must also include the effective annual interest rate, which is calculated in accordance with a formula approved by the Bank of Spain. The contract must also state the delayed payment surcharge to be applied if we are unable to meet our repayment requirements on time.
- Fees and expenses: the banking entity must specify the fees that it is going to charge us for taking out the loan, for any early redemption that we make, for the overall cancellation of the loan and for all those actions arising from the taking out and foreclosure of the mortgage.
Expenses arising from the mortgage
On requesting and processing the constitution of the mortgage, you shall have to be aware of a number of expenses, the most important of which we have listed for you below:
Prior to requesting the mortgage
- The survey of the property: expense generated when determining the real value of the property. Normally the banking entity manages this process on behalf of its customers.
- Checking the situation with the Registry: the expense arising from checking whether the property has any outstanding burdens or encumbrances.
On requesting the mortgage
- Opening or arrangement fee: to cover the expenses involved in opening the mortgage loan. This usually comes in at between 0.5% and 2% of the amount requested.
- Consultancy and processing expenses: the costs generated when the bond and mortgage deed is processed before the Tax Authorities for the settlement of taxes and the act of recording it in the Property Register.
- Notary expenses: here we shall have to include the expense of certifying the deed and the cost of the folios used and of the copies issued. The fees of the notary public are fixed by Royal Decree.
- Property Registry expenses: the cost that we shall have to foot as a result of recording the mortgage in the Property Registry.
- Stamp Duty: the tax levied for executing the deed which varies, depending on the Autonomous Region, from between 0.5% and 1% of the total guaranteed amount, in other words, the loan plus the interest plus the costs.
- Damage insurance taken out on the property: an obligatory policy that covers any possible damage that the property might suffer.
- Taxes generated by the acquisition:
- VAT: (7%) if the property is a new build.
- Transfer Tax: (7%) if the property is second-hand.
Calculator
With this tool you can calculate all the information you need to request a mortgage.
Do not forget:
Generally, with the assumption of a mortgage loan you can have the following advantages:
- You will only pay one mortgage loan fee.
- You will avoid opening fees, as well as valuation costs.
- If you decide for Developer mortgage, you will not have to pay Property Registry expenses.
