Current mortgage rates in Spain

What you need to know about the mortgage rates in Spain

It is important to read up on mortgage rates in Spain. After all, the processes are different from that you are used to in your home country!

We have listed for you what you need to consider in the case of a Spanish bank:

• Residential status Are you a Spanish resident or not? If you have paid taxes for two years in Spain, you are considered a tax resident. In that case you are allowed to borrow more (see loan-to-value) and you may get a better interest rate.
• Euribor or introbank rate - the interest rate offered is determined by the European Central Bank (ECB) interest rate or by the rate at which banks exchange (or have exchanged) money to each other. This may differ from current interest rates because an exchange took place earlier than the time of mortgage application.
• Interest rate expectations & security - if interest rates are stable, then banks often dare to give lower mortgage rates. If there is a lot of uncertainty, due to policies (e.g. from the ECB) changing, then there is more risk and Spanish banks will often issue higher interest rates to hedge themselves.
• Interest types - there can be quite a difference whether you choose a variable, fixed or mixed rate (mixed rate = temporarily fixed, then variable). It depends on market conditions which is more interesting at the time.
• Risk policy - foreigners get a risk premium from Spanish banks. This is rather logical, because it is harder for the bank to find you if you do not pay the monthly fees. Also, assessing your income (abroad, with a different tax authority) is trickier and that too will have a mark-up.
• Insurance & banking products - An important part of the interest rate is whether you purchase additional banking products from the mortgage lender. Think of a bank account, home insurance and life insurance. You don't want this? Then you are guaranteed to be offered a higher interest rate.
• Mortgage amount - the higher the purchase price, the higher the mortgage amount. From the bank's point of view, one big mortgage is more interesting than 10 small ones (less administration and risk assessment). So if the mortgage amount is higher, you get more wiggle room to negotiate the interest rate (provided your purchase profile fits)
• Your financial profile - the more monthly financial free space and available savings you have, the better you can negotiate with a Spanish bank. The bank would prefer that you spend as little of your net income on your mortgage as possible, so that you are less likely to become a defaulter if something happens in your life.
• Mortgage term and Loan-to-Value - the interest rate offered is determined by the mortgage term of you mortgage loan. The lower the interest rate, the faster the bank would like to get the money back (risk avoidance). The loan-to-value (or the percentage of loan to the property appraisal) also matters. The less you borrow relative to the value; the better your interest rate may become.
  So take into account: both components will affect the monthly costs in the overall calculation.

Of course, there are plenty of other reasons or causes that affect interest rates. But as you can see, there are plenty of influencing factors to your mortgage rate!