Spanish mortgage rates can be based upon a variety of indexes but the most common used is the EURIBOR. This is a floating variable based on the European Central Bank Rate and you will usually see mortgage interest rates quoted as “2.5% above Euribor.”
To complicate things there is actually more than one Euribor rate. There is a daily, weekly, monthly, 3 monthly, 6 monthly and 12 monthly Euribor rate so you need to know which one is being quoted in order to compare overall rates. The most common used in mortgage lending is the 12 monthly (which is also the highest rate out of those listed.)
Spanish mortgage lenders take the 12 month Euribor (in this example at 1.25%) and then add their own margin. So if the margin is 2.5% then the overall interest rate applied to your Spanish mortgage is 3.75% (1.25% + 2.5%.)
Lowest possible Spanish Mortgage Rates 2012 / 2013
Capital repayment Spanish mortgages
|Up to 50%||3.45%|
|50% to 65%||3.70%|
|65% to 70%||4.00%|
Interest only Spanish mortgages
|Up to 50%||Dependent on loan size
Interest only is available for a maximum of 2 years after which you will revert to capital and repayment.
In general, if your mortgage is based on the 12 month Euribor then you will pay the same amount every month for 12 months at which point the bank will update your payments and bring them into line with any changes in the 12 month Euribor over the past year. The same applies if your mortgage is therefore based on the 1 month Euribor except this time your rate is updated every month.
As well as looking at current interest rates, Euribor and margins above Euribor you also need to consider linked products. Almost all Spanish Banks now insist on “linked products” in addition to the mortgage. These can make quite a difference to the overall cost of the product which means relying solely on the headline interest rate is simply not enough to ensure you are getting the best mortgage product.
Linked products can include but are not limited to:
- Buildings insurance
- Contents insurance
- Life insurance
- A bank account
- Credit cards with minimum annual spend
- Health and unemployment cover
- Savings / Deposits
You will almost always need to take the bank account and buildings insurance with the bank. The dont cost much anyways and there’s little to be saved from shopping around.
Credit card with minimum annual spend is always optional and can sometimes be a good idea if the minimum spend is 2,500€ or thereabout and you do spend a lot of time in Spain. You can sue the card for flights and for purchases whilst here. For taking this out will be offered perhaps 0.15% to 0.25% off the mortgage interest rate. If you have a size-able mortgage this can work out to be rather beneficial.
Savings and deposits are also a good way of lowering the rate although this is not offered by many banks. I have seen up to 0.20% offered off the rate for keeping 3,000€ on deposit with the bank. On a 200,000€ loan that equates to a 400€ per year saving on a 3,000€ deposit…!
On the other hand though Health and employment cover is useless to you if you are not resident in Spain so is rarely Worth taking.
Life Insurance is very often a compulsory product these days with a Spanish mortgage as banks try to meet sales targets for insurance and increase there profits per client. Unfortunately where a bank insists on life cover there is little that can be done about it. But this is why it is important to use a broker. We know which banks offer very expensive cover and which ones can sometimes be persuaded to lowering the cost. If you are dealing direct with a bank you will be given a simple “take it or leave it” choice – often months into your application when you are under pressure to complete or risk losing your deposit! This can end up being an expensive mistake!