Finance you purchase with a mortgage in Spain
Before choosing which type of mortgage you need and at which financial institution you wish to apply, you should be aware that, in Spain: there are banks and savings banks; fixed and variable interest mortgages; mortgages with interest-only conditions, in which you only pay interest for a certain period of time, without repaying the capital; flexible and fixed-rate mortgages. So, depending on your debt capacity and your requirements, you will be more interested in one kind or another.
The vast majority of the mortgages taken out in Spain are of a variable interest nature and take EURIBOR as their reference, which indicates the average interest rate at which European financial institutions lend money to each other. An additional margin is added to the Euribor, which usually ranges between 1 % and 4 %. The loan payments are usually reviewed on an annual basis and their amount will rise or fall, depending on the Euribor. Fixed-interest mortgages usually have a considerably higher interest rate than variable-interest mortgages. Their main advantage is that they do not fluctuate with the market.
In order for the credit institution to approve your mortgage, you must provide documentary evidence that you are able to pay the monthly instalments. In general, the bank expects your global financial costs to not be higher than 35 % of your net income.
The amount of the loan will ultimately depend on the evaluation of your property that the bank itself will carry out. During the property boom in Spain, banks would even lend 100 % of the evaluation value, but in times of recession, such as the present, that percentage can fall as low as 50 %.
The repayment term will almost exclusively depend on the age of the applicants, although some banks and financial institutions have limits to this respect. The terms normally range from 10 to 25 years.