When we mortgage our assets we still own them, so we can sell, rent or re-mortgage, although in most cases the entity imposes on us as an obligation to be consulted before performing these acts
- Fixed: if interest does not change over the life of the loan
- Variable: if the interest varies at some point. In most variable-rate loans, an initial term (the first year or the first six months) in which interest is fixed is established. We have to bear in mind that this first-year interest is almost always greater than that which would result from applying the variable interest to be applied later, so that the first installments – of the fixed interest period – would be higher than the Later
- Mixed: when the interest rate is fixed for an initial period of more than 1 year and then variable
The characteristics of the mortgage loans are:
- There is a property
- A public deed must be made, which must be registered in the Property Registry
- It is a medium-term loan (usually between 15 and 30 years)
- There are several types of mortgage loans according to the interest rate (fixed, variable or mixed), the type of fee we pay or the type of currency in which the loan is paid (normal or in foreign currency) >
- The conditions of the mortgage will vary according to the entity where we requested the loan and also taking into account the purpose of the loan (acquisition of our habitual residence, purchase of a second residence, improvement of conditions «subrogation», reunification of debts-consolidation , Etc.)
- In order to terminate the mortgage, it is not enough that the entire loan has been repaid, but must be included in the registration, since if the mortgage is not made, it will still appear as «alive». Face it is necessary that the bank consents to cancellation and the costs are borne by the borrower
- To summarize: the mortgage loan is a financial product that allows us to receive money in exchange for our personal commitment to repay that amount, together with the corresponding interest, through periodic payments and by guaranteeing a property
- A principal loan contract, whereby one entity (the creditor, generally a bank or savings bank), lends money to another (the debtor)
- Mortgage, which is the guarantee that the debtor, or another by him, provides to the lender. It consists of a property (or several) is offered and secured as a guarantee that the loan will be returned, so that if it is not returned within the agreed time, the creditor entity can sell in public auction the mortgaged property for To collect what is due to him, being the surplus for other creditors or, in default, for the debtor
- Mortgage is not the only form of guarantee possible. In some cases, the financial institution requires that the mortgage be added a bond or guarantee, which consists of one or more people endorsing the debtor, obliging to pay if the debtor does not do so.
The indices below are those that have official character and elaborates and publishes the Bank of Spain
- Euribor: official benchmark. It is the simple average of the daily interest rates, applied for cross-transactions to the one-year term in the interbank market of the monetary union area, among the 64 financial entities with the highest level of business.
- IRPH entities: average type of the set of credit institutions. This index covers the previous two and, therefore, collects a much wider media
- IRS: (Interest Rate Swap) is the average futures market rate of five years
To know the current type of the main references for mortgage loans, access the Bank of Spain website
Before knowing the commissions that can charge us on our mortgage, it is convenient to know several concepts that will later help us to understand the bank’s requirements.
A)Loan capital: is the final amount granted, which we will have to repay within the stipulated term plus the corresponding interest.
B) Amortization: is the period in which the loan must be repaid.
In loans with French repayment system , which is used in the vast majority of mortgages, at first you pay more interest and less capital And the end of the loan is the opposite
It is important that we note that the longer term the more interest we are paying in the life of the loan and that reaching a term of (30-35 years ), However much we lengthen this, the quotas do not suffer almost lower in its amount
| Amount | Interest type | Term-years | Quota | Savings to previous account € | Saving with previous quota% |
|---|---|---|---|---|---|
| 100,000.00 € | 3% | 10 | 965.61 € | ||
| 100,000.00 € | 3% | 15 | 690.58 | 275,03 € | 28% |
| 100,000.00 € | 3% | 20 | 554.60 € | 135.98 € | 20% |
| 100,000.00 € | 3% | 25 | 474.21 € | 52.61 € | 14% |
| 100,000.00 € | 3% | 30 | 421.60 € | 52.61 € | 11% |
| 100,000.00 € | 3% | 35 | 384.85 | 36.75 € | 9% |
| 100,000.00 € | 3% | 40 | 357.98 € | 26.87 € | 7% |
It is important to consider several factors:
- The fees charged by the entity, by partial or total cancellation, especially in case of fixed interest, because the commission is usually higher
- If there are minimum or maximum cancellation limits
- If you allow, in case of partial advance, to choose between reducing the number of years of the loan, or reducing the periodic fee, or only allow one of the two possibilities
The possibility of early repayment of the loan should also be regulated. If this is partial, the entity usually places certain conditions, such as a minimum amount, or that early deliveries are made at the time that they must pay any of the periodic installments
In any case, the amounts that must be paid for early cancellation must be stated, with a distinction between partial and total cancellation.
d) TAE: is the ‘real’ interest of a loan, adding not only nominal interest, but other expenses, and taking into account how it will be returned. To compare loan costs, rather than nominal interest, you have to look at the APR
If, by analyzing two loans, one of them has a higher APR than the other, it will be more expensive, even if their nominal interest is lower.
Commissions
These are the amounts that the entity charges or may charge for different concepts. The most important commissions are:
- Opening: is a percentage of the principal of the loan that the entity charges at the beginning of the loan, once. Included to calculate APR
- Subrogation: is charged if the mortgaged property is transmitted, usually by sale, and is paid by the buyer, who, when subrogated In the mortgage, is new debtor
- Modification of conditions or guarantees (novation): provided for in case you modify any of the conditions initially agreed, especially the term or type Of interest
- Changing creditor (subrogation) entity: provided for in the event that the debtor, during the life of the loan, decides to take it to another entity that lends him / her Offer better conditions. The entity that loses it charges this commission
- You must formalize insurance on the mortgaged property, usually for damages and fires, although sometimes banks or boxes also require life insurance. And logically the obligation is to pay the annual insurance premium
- If you intend to dispose of or lease the mortgaged property, some limitation is usually agreed upon
- An explicit commitment to be up to date on all taxes, contributions and fees that the property has to pay
Other clauses:
- Constitution of the mortgage, determining total liability guaranteed
- Execution procedure, setting an auction value
- Submission to court, determining in which courts the claims will be filed, if applicable
- Agreements on assignment and subrogation, if both the bank and the debtor wish to replace a third party in their contractual position
- Additional personal guarantees, such as endorsement
The appraisals that are made for mortgage purposes have legal effects , so they are subject to compliance with rules regarding who can do them and how they should be done in order to ensure that the appraised value that is calculated is valid . That is why the appraisal reports are prepared by the appraisal companies approved and supervised by the Bank of Spain, and analyze technical and legal aspects of housing that could affect their value
The valuation of the house is done by an architect or technical architect who also has specific training in valuation . This technician does not make the appraisal individually, but is attached to an appraisal company that (Technical tools, databases, technical studies) and controls the quality of the valuation issued
The technical appraiser is subject to a regime of incompatibilities that guarantees his independence, and that he can not have any particular interest in the valuation
The appraisal value is generally the market value of a good, unless it is subject to some form of official protection, in which case the appraised value will correspond to the legal maximum value of the asset
The market value is the net amount that a seller could reasonably expect to receive from the sale of a property (well valued) at the valuation date, through appropriate marketing and assuming that there is at least A potential buyer correctly informed of the characteristics of the property, and that both buyer and seller act freely and without a particular interest in the transaction
The maximum selling price of a good subject to public protection established in the specific regulations applicable to it. Each autonomous community marks each year public protection modules through which the different legal maximums are fixed for each type of protection (general regime, special regime, price appraised). The type of regime is explained by the number of official protection file that appears in the deeds of the asset under the heading «tax benefits»
What valuation methods exist
To calculate the market value of a good, there are several methods:
- Comparison method: is the method most used and consists of valuing the object of the appraisal by comparison with other goods of similar characteristics whose value is known. The regulations require at least 6 «witness properties» that will be weighted by coefficients to resemble them to the asset under valuation. With this we will obtain a unit value of the m2 of property that multiplied by the m2 of the property object of valuation will suppose the market value of the same
- Residual method: When the comparison method is not possible, since it is not possible to find enough real estate witnesses of similar characteristics, the residual method is usually used. It consists of calculating the value of the property with which the construction would have once completed and subtract the expenses that must be incurred for the property to reach that state
- Capitalization method: When the property is likely to produce income and can be estimated in a logical manner the amount of the same is used the capitalization method. It consists of calculating the value of the property by updating to the valuation date of all net income that the property will generate by means of economic formulas. It is a method for valuing large businesses
- Cost method: The cost method is seldom used exclusively, but rather as support to the appraiser that the valuation he has made by the comparison method is logical. Consists of calculating the cost of re-placement or replacement of the property under assessment
What aspects of appraisals include
The checks carried out in the appraisals include the following technical and legal aspects:
- Me locate the house, checking that it really exists
- The house is inspected by a competent technician who checks:
- Mu surface
- Other features; Distribution, number of bedrooms and bathrooms, constructive qualities, visible installations …
- Its apparent state of preservation, and its constructive state (whether or not it is finished)
- The existence of visible easements that could affect value
- The technician checks whether the house you have visited coincides with the description in the documentation used to make the appraisal, including with the registry and the cadastral
- The apparent occupation status of the property and its intended use at the time of the visit is also checked
- If you investigate whether the property is subject to any public protection regime that might entail limitations on its value
- It confirms the adequacy of the property to the current urban planning, checking if there is any point that could affect the value of the house. Among other issues, it is checked whether it is subject to a regime of protection of the architectural heritage that entails special obligations for the owner
In order to be able to make the appraisal, the appraiser must have the documentation of the real estate property object of the appraisal, either copy of the property deeds of the same or simple note issued by the registry. Said documentation must be provided in the appraisal report and in case of the simple note should not be older than three months between the time of issuance and the date of issuance of the appraisal report
In the case of housing subject to public protection, administrative documents that allow determining the maximum price for sale or rent
Factors Affecting Pricing
There are some factors that appraisers take into account to make the appraisal and get a more accurate value of the property:
- Recent Sales: Although each property is different, it depends on the value of recent home sales in the same area. This is the key; The other criteria will be used to finish the appraisal value
- Surface: The size of the floor, as well as the number of rooms and bathrooms – in addition to their distribution – matter when appraising housing
- Age: In general, a new building has more value than an old one, unless it is a listed building or with architectural value
- Building materials and installations: types of finishes, air conditioning, heating, etc.
- Building: if you have elevators, common areas, access, etc.
- Environment: proximity to shopping centers, gardens and sports areas gives more value to housing and influences appraisal
- Public transport: proximity to public transport is another factor to take into account. It is not the same one floor next to an underground stop that another to ten minutes
Once the appraisal has been made, it will have a validity of six months from the issue date
- DNI in force of each of the holders-interveners
- Request of the corresponding entity signed by all the participants
- Work life of each headline (recent less than 30 days)
- Last declaration of the income of each of the holders
- Account movements for the last 3-6 months
- Purchase Deed
- 3 last paid receipts of all loans and cards
- Paid receipt of current year’s contribution (urban IBI)
Wage earners
- 3 last payrolls of each of the holders with employment contract
- Work contract of each of the holders
Autonomous
- Quarterly IRPF statements (last 4)
- Quarterly VAT returns (last 4)
Other documentation
- Marriage Capitalization
- Separation judgment and regulatory agreement
- Pledge Agreement
