Just like any advanced economy Spain has a developed mortgage market with a number of lenders offering a great variety of Spanish mortgages. Mortgages in Spain are offered by banks and savings banks (know as Cajas in Spain) and sold either directly by the lenders or through mortgage brokers. Several international banks, including British banks like Barclays and Lloyds TSB, offer mortgages in Spain alongside the national banks and cajas.
And just like any other developed mortgage market there are big differences in the costs and terms of the Spanish mortgages on offer, ranging from inflexible and expensive mortgages to cheaper and flexible ones. Although the interest charged on all Spanish mortgages is calculated as a function of the base rate set by the European central bank, beyond that mortgage lenders in Spain are relatively free to set the charges and terms of the Spanish mortgages they offer. This translates into significant differences between Spanish mortgages in terms of their costs and conditions. Not only do Spanish mortgages vary in their attractiveness from bank to bank, they also vary considerably within the same bank, and even from branch to branch.
With so many potential lenders, many of which who do not market their Spanish mortgages to foreign buyers, it is difficult if not impossible for foreigners to find the best deals on the market. However if you don’t shop around, or use a broker who shops around for you, it is highly likely that you will end up with a relatively expensive and inflexible Spanish mortgage that will cost you thousands of Euros more than you need to pay over the lifetime of the mortgage.
Types of mortgages in Spain
As in other countries such as the United Kingdom the vast majority of mortgages sold in Spain (to both Spaniards and Foreigners) are variable rate mortgages. This means that mortgage repayments vary according to the base rate set by the European central bank. Borrowers with variable rate Spanish mortgages cannot be certain what their mortgage payments will be in the future. If the interest rate falls they will pay less, but if it rises they will pay more.
Most lenders also offer a fixed rate Spanish mortgage. These Spanish mortgages tend to have higher interest payments in the short term but if interest rates rise a fixed-rate Spanish mortgage holder might end up paying less than would be the case with a variable-rate Spanish mortgage. At the very least they give borrowers the ability to know exactly what their mortgage repayments will be for a set time into the future.
