What types of mortgages are there in Spain?

UK clients are used to a myriad of mortgage products including fixed rates, variable rates, tracker rate, discount mortgages, capped rate, offset mortgages etcetera. In Spain, there are basically only two mortgage products available to non-resident clients purchasing a property here.

Fixed interest rate mortgage. UK clients are used to fixing their mortgage for a term usually of between two and five years and then when it matures, the bank reverts to a variable rate or the client can shop around for a new fixed deal. Spain is different. Rates in Spain are fixed for the lifetime of the mortgage so if you go for a 20 year term then you will be offered a fixed rate for 20 years. At the moment an indication on interest rates fixed for a 20 year term would be in the region of 2.7%, so if you intend to keep your mortgage for the full term as opposed to paying it off early, it may be a good idea to go for a fixed rate as who knows where interest rates will be in 20 years time.

Variable rate mortgage. This product is actually more similar to a UK tracker mortgage.  The banks will usually offer a fixed rate for the first twelve months and thereafter from year two they will offer a variable rate in line with 12 month EURIBOR. EURIBOR is the EU equivalent of LIBOR, which is set by the European Central Bank. They will offer a margin over the EURIBOR rate which they will fix for the following 12 months. A current indication would be EURIBOR + 1.5 from second year onwards. This is reviewed on an annual basis on the anniversary of the mortgage in line with EURIBOR and fixed for the following 12 months. Some banks will reduce the margin over EURIBOR if you take certain products with the bank such as life insurance, home insurance, bank cards etc. 12 month EURIBOR is currently negative at -0.248 and it has been since 2016 so a good option for clients who wish to make the most of all-time low EURO rates for the next few years whilst maintaining the option of paying off the mortgage early if they see that EURO rates start to creep up.

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