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MORTGAGE COSTS |
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PROPERTY VALUATION
Before granting a mortgage
a Spanish lender will require that the property be
valued by one of their appointed valuation companies.
This can cost anything from a few hundred Euros to
over a thousand Euros depending upon the value of the
property. The person applying for the Spanish mortgage
has to pay this cost.
LAND REGISTRY
FEE
Before a Spanish mortgage lender will grant a loan
on a property it will insist on seeing a nota simple (land
registry filing) that confirms that the property does
not have any other unexpected debts attached to it.
However you (or rather your lawyer) will need to request
a nota simple from the land registry for you
own sake so this can be considered a non-differential
cost that you would face with or without a Spanish
mortgage.
OPENING FEE
Most Spanish mortgage lenders charge a fixed
fee for setting up a mortgage. This is typically 1% of
the value of the mortgage, but can range from 0.5% to
2%.
NOTARY FEE
If a Spanish property has a mortgage secured
against it this has to be declared before a Notary. Notary
fees are based on the number of clauses in the deeds
and a mortgage deed will have approximately the same
number of clauses as a purchase deed. The notary will
charge for this and therefore a Spanish mortgage increases
the Notary costs at the time of signing the public
deeds of sale.
LAND REGISTRY FEE
Likewise the existence of a mortgage
on a Spanish property (the mortgage is seen as a debt
against the property) must be registered with the land
registry. This slightly increases the land registry
fees when buying property in Spain. The fee for registering
a Spanish mortgage is approximately the same as the
fee for registering the property.
STAMP DUTY (AJD)
This is a tax paid to the government
and is calculated as a percentage of a Spanish mortgage.
The amount can vary from region to region and vary according
to the amount of the mortgage. From a minimum of 0.85%
to a maximum of 1.7% of the value of the mortgage.
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Examples |
DEED ARRANGEMENT FEE
This is a fee payable to the company (gestoria) who arrange for the
deeds to be inscribed correctly in the local land registry. Lenders will normally
insist on using their chosen gestoria as they need to be absolutely
sure that both the property and the mortgage have been properly registered. This
should not be more than a couple of hundred Euros
EARLY CANCELLATION FEE
Spanish mortgage lenders do not like it when a client cancels a mortgage early
(for instance if they have found a cheaper mortgage). Therefore they often impose
a cost on early cancellation. It is common to find early cancellation fees of
1% of the value of a Spanish mortgage, though a good broker can find you a Spanish
mortgage with little or no early cancellation fee. From the client's perspective
a Spanish mortgage without this fee is preferable as it makes the Spanish mortgage
more flexible.
PARTIAL CANCELLATION FEE
Some Spanish mortgage lenders try to penalise clients who pay off part of their
mortgage early. This is known as partial cancellation and will often carry a
financial penalty related to the amount that is paid back early.
SUBROGATION FEE
If a Spanish property that has a mortgage secured against it is sold the mortgage
can be either cancelled or taken over by the new owner. The subrogation fee is
usually paid by the new owner and is typically lower than an opening fee for
a new mortgage (0.5% instead of 1%). If you are offered the possibility of subrogating
a Spanish mortgage it is important to bear in mind several factors. 1, subrogating
a Spanish mortgage means continuing with the existing mortgage (that means the
same conditions i.e. period and interest rate). In doing so you might not be
taking over the best terms available to you in the Spanish mortgage market .
2, On the other hand all of the set up costs; Notary, land registry and taxes,
are lower.
INTEREST PAYMENTS
If you have a Spanish mortgage you will find that your monthly mortgage repayments
are comprised partly of capital repayment and partly of interest on the loan
(unless you have an interest-only mortgage, which are still not very common in
Spain). At the beginning of the
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Capital repayments
on
a standard Spanish mortgage take place on
a monthly
basis and the amount depends upon the lifetime of the
loan.
mortgage the interest payments
will be the larger of the two, but as time goes buy
and you pay down the principal of the loan the interest
payments will decrease in relation to the capital repayments.
Interest payments are calculated as a function of the
base rate set by the European central bank (Euribor).
Some Spanish mortgages have a fixed rate for the first
period - say the first year - and then go on to Euribor
+x%. The 'x%' is the lender's margin on the loan, and
this will vary according to lender and client. In general
the margin that Spanish mortgage lenders charge varies
between 0.75% and 2.5% for variable rate loans.
CAPITAL REPAYMENTS
Capital repayments on a standard Spanish mortgage take
place on a monthly basis and the amount depends upon
the lifetime of the loan. The more years that you have
to pay off the principal, the lower the monthly repayments
in relation to the size of the overall mortgage. If
you take out an interest only Spanish mortgage then
you will not start paying back the capital until much
later on (for instance after 10 years or at the end
of the mortgage lifetime). The advantage of an interest-only
Spanish mortgage is that monthly mortgage repayments in the short term are low.
However you are not paying down the principal over time and need to be prepared
to return the capital in its entirety at the appropriate time. |
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