A new mortgage law approved by the Spanish government lowers the financial penalties for early repayment of spanish mortgages within the first five years. The legislation also abolishes commissions charged for converting a variable to fixed rate mortgage within the first three years of original purchase.
However, there are already several mortgages without commissions available on the market in Spain, where taking out a mortgage and early repayment doesn’t incur any additional charges. ING Direct, Bankia and Hipotecas.com all offer competitive mortgage products at variable, fixed and mixed rates. In the case of mixed rate mortgages, interest ranges between 0.99% and 1.59% and there may be a requirement to link other bank accounts to the mortgage.
There are several mortgage providers that have also eliminated penalties and commissions, although the linking requirements are greater. For example, in the case of ‘Mortgage Now’ of Liberbank there is a requirement to contribute €600 each month to one of the bank’s pension plans. A competitive variable rate product with the best offer of Euribor + 0.99% requires linked card purchases of at least 1,500 euros per year.
It’s important not to use the absence of commissions and penalties on repaying a mortgage as your main criteria when choosing the right one for a property purchase. Here we illustrate a comparison of some of the best mortgage products available to give an indication of what variables are involved:
The bank’s ‘Orange Mortgage’ has the lowest differential (Euribor plus 0.99%) among loans without commissions. This year, the entity introduced a fixed initial interest rate of 1.99% during the first twelve months of life of its variable loan. In doing so, the bank slightly increased the initial cost of one of the most competitive products in the market, although its mixed mortgage offers 1.99% during the first 10 years and then the Euribor plus 0.99%.
In January the bank eliminated commissions on all its mortgages. The only condition is to have your income paid into an account with them. The variable mortgage finances 80% of the property purchase price for habitual residence and establishes two ranges of interest rates according to income. If income is at least €1,800, Bankia offers 1.20% in the first year and Euribor plus 1.20% of the balance over 10 to 20 years. At a fixed rate, Bankia offers rates of 2.41% APR up to 10 years, 2.74% up to 20 years and 3.17% up to 30 years.
The online mortgage provider extends home finance from the Union of Real Estate Credits (UCI). With the only requirement of taking out home insurance with them, a variable rate of 1.99% is offered for the first two years and a differential to Euribor of 1.59% for the balance of repayments. The variable APR is 1.98% and the maximum term of the mortgage is 30 years.
Mortgage providers that do still charge commissions such as Santander, Liberbank, Kutxabank or Bankoa actually offer very attractive differentials of less than 1% at floating rates. Whether commission is charged or not, when it comes to making a decision you have to analyze the APR (which includes all expenses) and the requirements for linking the mortgages. It’s always worth bearing in mind that commissions are the most flexible element of a mortgage, so you have to negotiate hard with financial institutions to get the best terms.