Mortgages

06 January 2013

MORTATGE LOANS

The mortgage is a loan granted by the bank or other financial organization to purchase a property that serves as guarantee for the loan payment. The relationship between the parts is fixed by signing of notarial act that is registered in the State Register of Property. Nowadays a mortgage loan can cover up to 50% of the total cost of the property.

Independent companies that realize the evaluation of the mortgaged property determine its estimated cost.

COST OF MORTGAGE

The "cost" of the mortgage to be paid to banking institutions consists of two parts: interests and annual fees, and other costs of opening and prepayment of credit.

  • Evaluation of cost of housing that is acquired.
  • Proof of registry in the Property Registry. These are expenses for the request of information in Property Registry.
  • Notary fees. Mortgage loans are issued with an affidavit that reflects the conditions and characteristics of credit that was granted. Generally, this notarial act of the mortgage loan is made simultaneously with the notarial deed.
  • Taxes. Any affidavit involves the payment of taxes on the registration of documentary legal acts, which are usually 0.5% of total expenditure (base value, interest and costs), including the notarial certificate confirming the registration of the mortgage.
  • Cost of registration in the State Property Register. These costs are caused by the registration of the deed in the Land Registry.
  • Fee for the opening of mortgage credit. From 1% to 3% for the services of the bank.
  • Fee for account maintenance. This is done through a bank account, which leads to a corresponding commission for the maintenance and management of this account.
  • Preparation and payment of taxes. Banks are dealing with companies that occupy with registration and payment of taxes and registration of the notarial deed, and all work related to these issues.
  • Insurance. Mortgaged property insurance, and in some cases life insurance, is necessary to obtain the mortgage loan.
  • Interests.

This is the basis of the cost of a mortgage loan. It is returned to the financial institution not only the credit provided, but also the interest on the amount that the borrower owes at this time.

There are two types of interest rates: fixed and variable. Fixed interest rate which is determined at the moment of opening of the loan and does not change during the time of its existence. The variable interest rate, however, may vary depending on the policy rate. Both types of interest rates consist of the base rate (Euribor), established by the European Central Bank and the additional interest, fixed by each financial institution.

In recent years, the most beneficial is the variable interest rate. In this case, if the official interest rate falls, the quota to pay also decreases in proportion, and if the interest rate increases, the quota growths in proportion. Therefore, before you apply for a mortgage, you should consult a specialist regarding to the trends in development of financial market, if these trends are to rise or fall.

PAYMENT SYSTEM OF MORTGAGE LOANS (HOW IT IS RETURNED)

The most important aspects are:

a) The loan term, that is, the years during which the loan will be returned. It is important to note that longer is the duration of the loan, lower the monthly fees are, but in the end of the period you pay more interests;

b) The frequency of payment of the mortgage quota, i.e. the interval between the loan payments. The most common form is a monthly fee, but payment can also be done quarterly and in other intervals as agreed. As a rule, the same bank charges these fees from the current account of the payer.

c) The size of the quota. The size of the fee is determined by two elements: a part of borrowed capital, you are paying, and the interest paid on the loan amount. Typically it is used the French linear system of repayment of the loan, whereby the fee is fixed for the entire period of the loan (except when it comes to variable interest, in which case it changes) so that the part of the interest share decreases during the time and in parallel increases the share of the capital;

d) Finally, it is necessary to study the possibility of anticipated payment. This refers to the ability to repay the loan before the payment term expires, in this case, you should ask the bank to include this feature in the notarial deed of the property and agree the commission percentage that the bank will charge for this operation. Since 1994, the law sets a maximum fee rate for mortgage loans with variable interest rates, which may not exceed 1% of the amount of the anticipated repayment. For mortgage loans with fixed interest rates, there is no official limit, but it usually ranges between 2% and 4% of the amount repaid in advance.

The interest on late payment are applicable if after the expiry of the loan term there are still unfulfilled obligations. These interests may exceed four points more to the current annual nominal rate of interest. This point is established by different banks in different ways.

The costs associated with the anticipated repayment of the loan are registered in the same steps that were followed at the time of its opening: the notarial deed, the payment of taxes of documentary legal acts and the deed registration in the Property Register.

DOCUMENTS NEEDED TO APPLY FOR A MORTATGE LOAN:

FOR INDIVIDUALS:

  • National Identity Document (DNI), residence permit or passport with NIE.
  • Sales contract, down payment or deposit.
  • Certificate of the company, with the occupied position and salary.
  • Declaration on the payment of income tax for the past two years.
  • Bank statements of the last 6 months.
  • Other financial documents: other accounts and deposits.
  • Certificates of ownership of personal property.

All such documents must be apostilled and translated by an official translator.

FOR COMPANIES:

  • CIF (tax number).
  • The Constitution, notarial act of possible modifications, such as the expansion of capital.
  • Power.
  • Internal balance.
  • Balance of Trade Register.
  • Tax Society.
  • Declaration of VAT payment.
  • DNI of the shareholders or directors.
  • It is possible that some good references from suppliers and / or customers are required.
  • Data banks with which the company operates.
  • Last receipts of current loans.

Work out the monthly payments and the amortization schedule on the loan that you need

Loan amount       Interest rate %     
   
Loan term (years)       Monthly payment