Repayment of the initial loan amount by means of a scheme of instalments, including a repayment of capital borrowed and an amount for the interest charged. According to the type of mortgage, these instalments can be fixed for the whole life of the loan or vary with interest rate fluctuation.
Cancelación anticipada (Early Repayment or Early Redemption)
This means the total or partial repayment of the borrowed amount before maturity. In par tial repayments, you can choose to reduce the monthly payment and keep the agreed final maturity date, or keep the same amount of instalment but shorten the term.
Cancelación registral (Register Discharge)
Once the mortgage has been repaid, the encumbrance has to be released from the Land Register. This involves costs of Notar y, Register and Solicitor.
Carga (Encumbrance or Registered Charge)
Legal charges regarding a determined property entered in the Land Register, i.e. mortgages, usufructs etc.
Our recommendation: Before signing the purchase contract, ensure that there’s no encumbrance related to that property in the Land Register.
Cédula de habitabilidad (Occupancy Certificate)
This document certifies that the home meets minimum occupancy conditions. You will need to produce this document when contracting utilities such as water, electricity and gas.
Comisión de apertura (Opening Fee or Loan Arrangement Fee)
This is a percentage of the loan discounted from the total amount when it is paid into your account, for services rendered in granting and processing the mortgage.
Our recommendation: The opening fee is always a single payment.
Comisión de cancelación anticipada (Early Repayment Fee)
This fee, indicated in the mor tgage contract as a percentage of the repaid amount, compensates the lender for the loss of interest payments expected for the period between the early redemption and the agreed maturity.
This is a set value throughout the term of the mortgage which is usually expressed in percentages or fractions and which is added to the value of the reference rate to calculate the interest rate for each revision for variable rate capital repayment mortgages.
Escritura pública de compraventa (Deed of Sale)
This document legalises the purchase and shall be signed by both contracting parties and by the notary. The purchaser obtains a first copy of the deed once all taxes have been paid and the corresponding inscription in the Property Register has been done. EURIBOR
European Inter-Bank Offered Rate, an index based on the interest rate for deposits in Euros at twelve months that is published by the European Central Bank and commonly used as reference rate for variable rate mortgages.
The professional adviser who looks after dealings with the Register and the payment of taxes to the Tax Authority.
A legal charge entered in the Property Register when a real estate property is assigned to be collateral for a mortgage loan.
Impuesto actos jurídicos documentados, AJD (Transfer Tax)
This tax is payable on sales transactions subject to VAT and mortgage loans, at a rate of 0.5% on total coverage of the mortgage or on the deed amount in the case of sales subject to VAT.
Impuesto sobre el valor añadido, IVA (Value Added Tax, VAT)
Sales made directly by a developer (newly built homes) are subject to VAT. The current standard rate is 7% on the sales value in case of private use and 16% in case of commercial use. In some autonomous regions like in the case of the Canary Islands the rate might vary.
Impuesto sobre transmisiones patrimoniales, ITP (Capital Transfer Tax)
This tax is payable instead of the VAT when the property is not newly built. In this case, the standard rate of 7% is independent of the assigned use of the property, but there are regional differences.
Indice de referencia (Reference Rate)
This base rate is, on variable rate mortgages, used to calculate the new interest rate when it is reset.
Our advice: Pay attention to the fact that the reference rate, together with the margin, determines the amount of the future instalments.
Interés ordinario (Ordinary Interest)
That is the nominal interest rate. It has to be specified in the contract whether the rate is fixed or variable throughout all or part of the loan.
Índice de Referencia de Prestamos Hipotecarios = Similar to the EURIBOR, this rate is used as reference for variable rate mortgages and published by the Banco de España. It represents an average rate for mortgages offered by all Spanish financial entities.
The Notary acts as the public official when signing the public deeds, such as the sales or mortgage loan agreement. He is obliged to ensure that current legislation is fulfilled and to defend the interests of the parties, particularly the borrower’s interests.
Oferta vinculante (Binding Quotation)
An overview of the financial terms of loans on property offered by financial institutions. The Ministerial Ordinance of May 5th, 1994 regarding transparency of mortgage loans, stipulates the obligation of making a binding quotation for each mortgage loan, which meets the following specifications:
- The borrower must be an individual person.
- The collateral must be a privately used home.
- The amount must not exceed €150,000.
The binding quotation must indicate that if the borrower accepts the quotation, he will have the right to examine it at the notary’s office, for three working days before the signing of the mortgage contract.
Periodicidad de las revisiones (Resetting Frequency)
This means the frequency of interest rate resetting on variable rate mortgages, which are usually carried out once or twice a year.
Plazo de amortización (Term or Repayment Period)
The period of time during which the loan capital and the corresponding interest have to be repaid.
Préstamo hipotecario (Mortgage Loan)
Usually known simply as Hipoteca (mortgage), this is a loan granted by a lender and backed by a property.
Registro de la propiedad (Land Register and Land Registry)
The Land Register contains all acts, contracts or legal charges referring to a property, such as ownership or encumbrances. Registro de la propiedad is also the local department responsible for maintaining the Land Register, i.e. the Land Registry.
Subrogación (Remortgaging with another lender)
If you have already a mortgage, but another lender offers you better terms and conditions for your mortgage, you can remortgage, i.e. transfer the mortgage and all the corresponding rights to this new lender. This transaction is tax-free.
Subrogación de deudor (Remortgage of the debtor)
This is a substitution of the debtor´s mortgage. That is to say, when the person who buys a mortgaged property takes responsibility for all debts and encumbrances that the seller had towards the financial institution that conceeded the mortgage.
Tasa anual equivalente, TAE (Annual Percentage Rate, APR)
This represents the effective cost of a loan calculated as if it were paid as one single repayment each year. It has to be indicated on any loan offer to make it easy to compare different loan offers with different characteristics (interest rate, commissions, reference rates, margins, etc.).
Our advice: All offers must indicate the TAE value. It will help you compare with other products and make the best and most profitable decision.
An independent surveyor company carries out the valuation of the property in order to determine the current value of the home within the property market and to specify the maximum amount that can be financed. The valuation is valid for six months after the date of issue.
Our advice: It is important to ask for a copy of the valuation. It is a service you pay for and you have the right to demand a copy.
Verificación registral (Land Register Check)
That is the examination of the Land Register records of a property, verifying the legal owner and the existence of charges, such as mortgages, encumbrances etc. The document where all this is reflected and that must be presented to the bank is the “Nota simple de cargas”.