Spanish Mortgage Costs
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Thursday, 23 Oct 2008
Mortgage Costs in Spain
Once all the necessary requirements have been met for a mortgage loan to be granted, the lender will take the following steps prior to closing it:
The valuation: The home must be appraised, that is, an independent expert authorised by the Ministry of the Treasury must perform a valuation.
Registry verification: This consists of verifying with the Property Registry whether the home to be mortgaged is subject to any liens or encumbrances. Both processes entail a series of costs payable by the applicant, whether or not the loan is approved. Once these data have been confirmed, the mortgage loan can be closed.
Closing costs
Loan origination fee: This is a one-time fee charged by the lender at the start of the loan. It tends to be a percentage of the amount of the loan.
Assumption fee: Loan assumption is the process whereby one person assumes the debt of and legally substitutes the holder of a loan with regard to the rights and obligations arising therefrom, that is, he or she becomes the borrower. It occurs when a person purchases a home from a private individual for which a mortgage has already been arranged or purchases a home directly from a property developer/contractor. The lender must agree to the assumption, and the party assuming the loan must pay the corresponding fee, although in this case no origination fee will be charged.
Notary fees: These are for the preparation of the public deed executed by the notary. The amount to be paid will depend on the official fee schedule.
Taxes: When a loan is arranged, it is subject to stamp duty. The amount to be paid for this tax is calculated by applying the rate in force in each autonomous community (see Appendix V) to the mortgage liability (approximately twice the amount of the loan).
Property Registry recording fees: Once the mortgage deed has been executed, it must be recorded at the relevant Property Registry. The lender is responsible for recording the deed. The amount to be paid will depend on the official fee schedule.
Other possible costs
Late-payment interest: This is the interest rate applied to those amounts that, upon coming due, remain outstanding. In short, it is a penalty applied to the borrower for breaching his or her payment commitments.
Compensation for early repayment: this will be charged on the amount of the loan that is repaid before the agreed upon dates. There will be a charge of 0.50% if the repayment is made within the first 5 years of your mortgage. Starting in the 6th year, 0.25% will be charged.
Loan amendment fee: This fee is charged should any of the conditions established at the start of the loan agreement be amended over the life of the loan by request of the customer and with the approval of the lender. The amount is calculated as a percentage of the outstanding principal at the time the amendment is made.
Charge for notice of default: In the event of default on payments, the lender will usually charge the customer a fixed amount at such time as the payments are made. This amount is pre-established in the loan agreement. The schedule of fees chargeable to borrowers must be previously reported to the Bank of Spain and available to anyone wishing to consult it.
The borrower may only be charged those fees expressly stated in the mortgage deed.
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