All about mortgages in Spain in 2022

Thanks to low interest rates and transparent terms, mortgages in Spain remain as popular as ever in 2022. We will not hide the fact that in recent years getting a mortgage from a Spanish bank has become somewhat harder: banks look more closely at the borrower’s financial situation, ask for a large set of documents, check and double-check the information provided and generally test the patience of the people who apply to them. Even so, demand for mortgages in Spain is not falling in 2022, because for most young people and young families it is the only chance to own a home.

Every year Spanish banks design new mortgage products with reduced rates or bonuses. They are aimed above all at customers planning to buy their first home, at young borrowers and at buyers looking to purchase bank-owned property.

All the major banks also run loyalty and reward schemes, cutting the interest rate in return for buying additional banking products, having income paid into and bills paid from the bank account, or joining private pension and investment plans.

Let us look at everything involved in getting a mortgage in Spain in 2022, and give the current interest rates of the leading commercial banks.

Choosing a bank for a mortgage in Spain in 2022

The borrower is completely free to choose the lending bank, both at the preparation stage and once the mortgage has been taken out. At any time the customer can request a subrogation (subrogación), that is, a transfer of the outstanding debt to another bank. In this case a new mortgage contract is signed and the original mortgage is closed at the same time.

On subrogation, the first bank charges the departing customer a fee: if the switch to the new bank happens in the first three years, the fee is 0.15% of the outstanding mortgage amount; in later years it is 0%.

The new mortgage law passed in 2019 banned Spanish banks from including onerous or restrictive terms for borrowers in mortgage contracts. As a result, all transactions involving banks have become completely transparent and practically standardised.

Notaries now also protect the customer’s rights (mortgage contracts are always notarised): they must not only check that transactions are sound but also hold a preliminary interview with the borrower in every case. At the interview the notary makes sure that the customer fully understands the terms of the transaction and is clear about the rights and obligations of the parties.

Of course, this care for the customer has a downside: transactions that involve a mortgage now take two months or more.

Cláusula suelo, insurance and other additional financial products

The “cláusula suelo” (floor clause) is a special term that Spanish banks liked to abuse before the new mortgage law was passed. It is a clause in the contract that set a minimum level for the variable interest rate, below which the rate could not fall. A variable rate is linked to a particular benchmark (we will look at this in more detail below), most often EURIBOR.

Mathematically it looks like this: X% + EURIBOR, where “X” is the fixed part of the formula and “EURIBOR” the variable part. Banks used to be allowed to set a limit in the mortgage contract: however far EURIBOR fell, the final variable interest rate could not go below a certain figure. Banks are no longer allowed to set such limits. So EURIBOR can fall to any level, and the mortgage interest rate must follow it down without any restriction.

As a rule, banks recalculate the rate once every 6 or 12 months. In July 2022 the average value of the benchmark was 0.992%. Its lowest level was recorded in January 2021, at -0.505%.
As for insurance and other financial products, the bank may not force them on the customer. At the same time, nothing stops the bank from refusing a loan to a borrower who will not cooperate. Here you will need to manoeuvre and weigh up the benefits: insurance, debit and credit cards, private pension plans, having your salary paid into the account can all be rewarded with a mortgage rate cut of several points, and in certain cases and at certain banks of more than 1%.

Costs of taking out a mortgage in Spain in 2022

Here too the mortgage law protects customers’ interests: banks must bear almost all the costs, and only a small share falls on the customer.

When taking out a mortgage in Spain, the customer pays for the valuer (an independent valuation of the property before a mortgage is granted is compulsory) and then for their own copy of the notarised mortgage contract. Incidentally, the valuation may be higher or lower than the transaction price.
All other costs are paid by the lending bank, namely:

• The fee of the notary who notarises the mortgage contract.
• Its own copy of the notarised mortgage contract.
• Stamp duty (Impuesto de Actos Jurídicos Documentados – IAJD).
• The services of the agent who manages and oversees the mortgage paperwork.
• The fee for registering the mortgage contract at the Land Registry.
• The notary’s role in arranging a mortgage in Spain in 2022

As we noted above, the notary plays an important part in the mortgage process. First, the notary checks the documents provided by the bank against those held by the customer to make sure the mortgage terms are identical: there must be no discrepancies. Second, the notary holds the preliminary interview with the customer, as we described above. Third, the notary registers the mortgage contract. By law, at least 10 days must pass between the interview and the signing: this is the time the customer is given to make a considered decision.

Bank fees for early mortgage repayment and the right to repossession (embargo)

The system of fees for early repayment of a mortgage in Spain has been standardised and today looks like this:

• For variable-rate mortgages: 0.25% from the 1st to the 3rd year or 0.15% from the 1st to the 5th year (by agreement of the parties), and 0% from the 4th or 6th year.
• For fixed-rate mortgages: 2% from the 1st to the 10th year and 1.5% from the 11th year.

The rules under which banks may start repossession (embargo) when a mortgage is not repaid have been standardised in the same way.

The bank can start repossession proceedings if at least one of these two circumstances applies:

• The loan is in the first half of its term, and the customer’s arrears amount to 12 months or have reached 3% of the total mortgage loan;
• The loan is in the second half of its term, and the customer’s arrears amount to 12 months or have reached 7% of the total mortgage loan

Mortgages in Spain in a foreign currency

This is another interesting change that the new law brought to the Spanish mortgage market. It is now accepted that if the currency of the loan (in Spain, the euro) differs from the currency of the country where the borrower permanently lives, or from the currency in which they earn their income and hold most of their assets, the loan is treated as granted in a foreign currency.

This change affects all borrowers who live and/or earn their income outside the eurozone. The law gives such borrowers additional rights, namely to:

• Convert the debt into the currency of their income or assets;
• Convert the debt into the currency of their country of permanent residence at the time the mortgage contract was signed;
• Convert the debt into the currency of their country of permanent residence at the time of conversion.

Needless to say, Spanish banks were not at all keen on taking on extra currency risk, and many of them stopped working with borrowers from outside the eurozone. Many, but not all. Some banks (for example, Banco Sabadell) still grant mortgages to customers with income in other currencies. But they check far more thoroughly and ask for far more documents than from local residents.

Types of mortgage interest rates in Spain in 2022

Mortgages in Spain come with three types of interest rate:

• Variable (mentioned above). A variable rate is subject to market fluctuations. It is usually the lowest rate a bank offers, but it also carries more risk. In Spain variable rates are mostly linked to EURIBOR, and in the past you could also find rates linked to LIBOR. Variable rates are currently at a record low, but nobody is willing to predict how long this will last.
• Fixed. These rates are not reviewed and apply for the whole repayment term of the mortgage. A fixed rate is always higher than a variable one (banks build into it the profit they might lose if the market rises), but at the same time it is the most reliable and the easiest to understand: whatever happens in the market, the borrower always pays the bank a fixed monthly instalment. Interestingly, Spanish banks often insist on a fixed interest rate themselves, and for non-resident borrowers it may even be a mandatory condition.
• Mixed. This is a combination of the first two. In the initial period (usually 10 years) the mortgage is repaid at a fixed rate, and after that, until it is fully repaid, at a variable rate.

When choosing a loan, you should also look at two figures, TIN and TAE. These abbreviations always appear next to interest rates:

• Tasa Anual Equivalente (TAE) is the effective interest rate (APR). It shows how much the mortgage will really cost once additional expenses are included, such as bank fees, insurance and any extra payments. Most of these costs usually fall in the first year, when the mortgage is taken out.
• Tipo de Interés Nominal (TIN) is the nominal interest rate. It is the pure loan rate, without additional financial products and costs.

Mortgage terms in Spain in 2022

Every bank publishes several mortgage products on its website, with a detailed breakdown of the current reductions and bonuses. On average, loans are granted for up to 30-35 years (or until the borrower reaches the age of 75-80). The loan covers 60% to 80% of either the purchase price or the valuation, whichever is lower.

You can expect the maximum loan if you are buying your first home, which must become your main residence, or a bank-owned property. There are also special products for young people: Banco Santander, for example, offers up to 95% financing to customers under 36 buying their first home, and Bankinter up to 90% for up to 40 years.

The final terms, repayment periods, loan amounts and rates are always worked out individually after an interview with the prospective borrower and an analysis of their financial situation. If you are buying a second home, a third and so on, the repayment term will be shorter and the loan smaller. In any case, the monthly mortgage instalment must not exceed 40% of your income.

And, as we noted above, the more additional financial products you buy from the bank, the lower the rate it will offer. Banco Santander, for instance, offers up to 1.10% in bonuses (for having your income paid into the account, using credit cards, buying insurance, obtaining an energy certificate and so on).

Taking out a mortgage in Spain requires opening a current account (cuenta corriente), from which the monthly instalments, insurance, fees and other costs and taxes will be debited. The account may be free or charged for, depending on the bank’s policy and current terms.

As for documents, each bank asks for its own set. In any case, it must include financial documents (payslips, bank statements showing account activity, tax returns), personal documents (identity cards, passports, marriage and/or children’s birth certificates), the reservation contract with details of the seller and buyer, the price and the terms of the transaction, and the report of the independent valuer.

Current mortgage rates in Spain in 2022

Here are the current rates of the leading Spanish banks at the end of summer 2022:

Variable rate:

• Banco Santander: from 1.87% TIN for the first 6 months and EURIBOR + 1.87% from the 7th month (that is, recalculated every six months). With maximum bonuses, EURIBOR + 0.77% from the 7th month.
• BBVA: from 0.89% TIN for the first year and EURIBOR + 1.79% from the second year (that is, recalculated once a year). With maximum bonuses, EURIBOR + 0.79% from the second year.
• Banco Sabadell: from 2.55% TIN for the first year and EURIBOR + 1.75% from the second year (that is, recalculated once a year). With maximum bonuses, from 1.55% TIN for the first year and EURIBOR + 0.75% from the second year.
• Bankinter: from 2.55% TIN for the first year and EURIBOR + 2.05% from the second year (that is, recalculated once a year). With maximum bonuses, from 1.25% TIN for the first year and EURIBOR + 0.75% from the second year.
• ING: from 1.75% TIN for the first year and EURIBOR + 1.59% from the second year (that is, recalculated once a year). With maximum bonuses, from 0.95% TIN for the first year and EURIBOR + 0.79% from the second year.

Fixed rate:

• Banco Santander: from 2.81% TIN for the first 6 months and 3.81% from the 7th month (that is, recalculated every six months). With maximum bonuses, 2.71% from the 7th month.
• CaixaBank: from 2.70% TIN without bonuses and from 1.70% TIN with bonuses for terms of up to 15 years; from 2.85% TIN without bonuses and from 1.85% TIN with bonuses for terms of up to 20 years; from 2.95% TIN without bonuses and from 1.95% TIN with bonuses for terms of up to 30 years.
• BBVA: from 2.95% TIN without bonuses for the first 6 months and from 1.95% TIN with bonuses for terms of up to 15 years.
• Banco Sabadell: from 3.35% TIN without bonuses for the first 6 months and from 2.35% TIN with bonuses for terms of up to 30 years.
• Bankinter: from 4.10% TIN without bonuses and from 2.80% TIN with bonuses for terms of up to 10 years; from 4.15% TIN without bonuses and from 2.85% TIN with bonuses for terms of up to 15 years; from 4.20% TIN without bonuses and from 2.90% TIN with bonuses for terms of up to 20 years; from 4.25% TIN without bonuses and from 2.95% TIN with bonuses for terms of up to 25 years; from 4.30% TIN without bonuses and from 3.00% TIN with bonuses for terms of up to 30 years.
• ING: from 3.79% TIN without bonuses and from 2.99% TIN with bonuses for terms of up to 25 years.

Mixed rate:

• Banco Santander: 2.20% TIN for the first 6 months and 2.10% (with bonuses) or 3.20% (without bonuses) from the 7th month up to and including the 9th year. For the rest of the mortgage term, rates from EURIBOR + 0.77% (with bonuses) or EURIBOR + 1.87% (without bonuses).
• Bankinter: if the initial fixed-rate period is set at 10 years, from 4.10% TIN without bonuses and from 2.80% TIN with bonuses during that period, and then until repayment from EURIBOR + 2.05% (without bonuses) or EURIBOR + 0.75% (with bonuses); if the initial fixed-rate period is set at 15 years, from 4.20% TIN without bonuses and from 2.90% TIN with bonuses during that period, and then until repayment from EURIBOR + 2.05% (without bonuses) or EURIBOR + 0.75% (with bonuses); if the initial fixed-rate period is set at 20 years, from 4.25% TIN without bonuses and from 2.95% TIN with bonuses during that period, and then until repayment from EURIBOR + 2.05% (without bonuses) or EURIBOR + 0.75% (with bonuses).
• ING: from 3.45% TIN without bonuses and from 2.65% TIN with bonuses for the first 10 years, and then until the end of the loan term from EURIBOR + 1.59% (without bonuses) or EURIBOR + 0.79% (with bonuses).