If you are thinking of buying a holiday home in Spain, or perhaps you are retiring to Spain, it might be a good idea to look at your finance options.
Mortgages rates in Spain are at an all time low, so an excellent time to buy. There are mainly only two mortgage products available from the High Street banks to non-resident clients.
You can choose between a Variable or Fixed rate.
VARIABLE RATE MORTGAGES
Variable rates from the Spanish banks tend to work in the following way. They will offer the client an initial fixed period, usually one year fixed with an indication of between 1.9% and 2.4% depending on the bank. After that the variable rate kicks in. The banks will use twelve month EURIBOR rate, which is currently negative (Jan 02, 2020 -0.248%) and has been since 2016 and add a margin of between 1.5% and 1.9% (indication). This rate is reviewed annually in line with EURIBOR rates. So if you believe that there is not much likelihood of rates rising in the short term and your intention is to pay off the mortgage in its entirety or partially early, then it makes sense to go with the variable product. What is EURIBOR.
BENEFITS OF VARIABLE RATE MORTGAGES
One of the biggest advantages of Spanish mortgages is that, it is cost effective to pay off a variable rate mortgage early. The banks have standard fees for this of either 0.25% in the first three years of the amount you pay off or 0.15% in the first five years. Thereafter it’s reduced to 0% early redemption fee. Some banks will even allow you a certain percentage that can be paid off free of charge each year e.g. 20% of remaining capital.
FIXED RATE MORTGAGE
Fixed rates are fixed for the lifetime of the mortgage. So if you have a 20 year term on your mortgage, your rate will also be fixed for 20 years unlike fixed rates in the UK where they tend to be fixed for a shorter term then automatically revert to the SVR (Standard Variable Rate). The client has the choice of moving to another bank who may be offering an attractive rate after the initial fixed period has expired.
BENEFITS OF FIXED RATE MORTGAGES
The advantage of Spanish fixed rates is that you know exactly what your repayments will be on the mortgage for its lifetime.
This product benefits clients who are looking to keep the mortgage for its full term and not pay it off early.
*Indication of fixed rates for non-residents currently depending on term, amount and client’s financial circumstances are between 2.5% and 3.0%.
*For clients earning EUROS, there are some excellent fixed interest rates currently of between 1.5% and 1.9%.Rates given as of 02.02.2020 and for indication only and are subject to change.
*Rates given are subject to individual circumstances, terms and conditions apply.
Always remember, your home is at risk if you do not keep up payments.