Spain Mortgages

One of the major problems to consider at the time of signing a contract to purchase Spanish property is finding a mortgage that is not going to cost more in the long run than the property's value. When dealing with Spanish banks it's of great importance that the mortgagor knows the different types of interest payments available and the advantages and disadvantages of each.

The market is awash with mortgage providers so choosing the correct Spanish mortgage loan may require the use of a broker to help find the best offer for your needs. This is especially true for residents who are not restricted to a limited choice of banks.

The largest mortgage banks in Spain are Santander, Banco Bilbao Vizcaya, la Caixa, Caja Madrid, Banco Popular, Bancaixa, Sabadell, and if you're in Andalusia like I am, Unicaja. Each of these banks offer a full range of mortgage types, fixed, variable or mixed.

Fixed interest of the mortgage in Spain
The main aspect of a fixed interest mortgage is the monthly repayment amount being the same from month to month for the life and duration of the mortgage loan.


Fixed interest mortgages in Spain have the advantage of usually being for shorter terms than other types, meaning of course the entire debt is repaid in a much reduced time frame. Typically Spanish fixed interest mortgages are amortized for 12 or 15 years, and in some cases 20 years.

For buyers on fixed incomes, for example those who work in the government sector, fixed interest mortgages are very attractive, and if income is index linked, then the percentage of mortgage repayments against income reduces over time.

Of course the disadvantage is obvious; a drop in mortgage interest rates won't benefit the mortgagor and in a free market such as Spain and the EU enjoy it is conceivable that interest rates could drop during the life of any mortgage.


Remember also that fixed interest mortgages may have higher fees to pay out the loan. With fixed interest rates banks have been known to charge as much as double the usual payout fees, so if selling the property prior to the mortgage being fully repaid is an option, be sure to enquire about the fees.

Variable interest rate Spanish mortgages
Variable interest rate mortgages in Spain are somewhat fixed owing to the effects of being part of the Eurozone. The Bank of Spain (part of the European Central Bank) mandates that variable mortgage interest rates cannot be greater than a 1% differential over the Euribor.

This means that if the European interest rate is 3%, then Spanish mortgage lenders cannot offer more than 4%, so any competition for variable rate mortgages is only going to be over a very small difference in percentage. In practice a mortgage provider may still suit your needs better than the next if other fees or flexibility are favourable.

Variable rate mortgages in Spain are reviewed every 6 months, so in practical terms they can be considered somewhat fixed, at least more so than British mortgages which can change from week to week or month to month.

Spanish variable rate mortgages are mostly spread over longer time frames than fixed mortgages, 25 or 30 years being common, but with mortgages upto 40 years available. With the amortization period being longer banks tend to make more profit from variable rate mortgages so reduced termination fees on repayment can be expected.

Mixed interest rate Spanish mortgages
In Spain a hybrid mortgage is now available that takes the best of fixed and variable rate mortgages and combines them into a mixed interest mortgage. Typically the mortgage will be for a time frame in between both, and is often fixed for the first 3 or 5 years, converting to variable rates after that.

These are a great mortgage for investors not intending to hold onto Spanish property for long periods of time. Mixed rate mortgages are most often sold to first home buyers in Spain and are viewed locally as the mortgage type that most teaches first home buyers to budget and be responsible.

Spain has 5th largest economy in the EU and 8th largest in the world, the banking industry is stable, and Spanish savings banks (cajas) are mostly unaffected by the sub-prime fiasco. Spanish Mortgage lending has decreased in light of the financial crisis but in Spain the banking sector doesn't anticipate any major collapses.

Property prices in Spain are projected to nose-dive in 2009 and not recover again for another 2-3 years making for a very attractive and stable market in which to pick up property bargains, and with good leasing potential in most urban areas a good profit could be made with the right property.

A Spanish mortgage is an attractive option for investors and will often cost less than a mortgage from the UK. Banks in Spain are familiar with their local housing markets whereas banks based in other nations of the EU or abroad aren't, and will probably not offer favourable terms.

Non resident mortgages of upto 90% may be available but the norm is 60-70% due to higher perceived risk, and upto 120% over forty years for residents although again this is subject to profile and is not normal.

Many brokers will be happy to arrange a call back to discuss your needs, which you should take them up on. Don't be put off by the idea of a hard sell, simply know what it is you want to know before you begin, and make sure they stick to the point, after all they don't get paid until your signature is on the contract so make them do some work for you.

Most mortgages available in Spain are variable rate, with base interest rates determined by the European Central Bank. Mortgage interest rates will be quoted as a single rate on advertising cards, but are made up of two rates, the ECB rate + a bank rate, and will be written as Euribor + x%.

Variable rate mortgages are mostly re-evaluated every six months to take account of changes in the Euribor which owing to it's stability rarely fluctuates so mortgage borrowers in Spain tend to have more certainty of their repayments.

Fixed rate mortgages are available in Spain and are becoming more popular yet have traditionally been available only in special circumstances. They tend to be more expensive, repayments will be higher, but other terms may be more favourable so it's important to get your broker to run through the differences as they apply to your situation.