January 27, 2012 at 5:25 pm #56507AnonymousParticipant
Available mortgage types – rates reasonable / interest only?
I am in the process of applying for a mortgage (K€200) for a property purchase in Catalunia (Girona area) with a loan-to-equity ratio of 60%. The offers I received so far vary between Euribor 12M + 2,0%-2,5% for a 20 respectively 25 year mortgage plus the usual suspects (bank fee, home insurance, some demand life insurance, etc.). My questions:
1) Does this match your current view on the market? Are those rates reasonable?
Here in Germany we often work with “interest only” mortgages, i.e. you only need to pay the interest on a monthly basis (which subsequently lowers your monthly burden as you do not necessarily reimburse/pay back anything). However you can pay back any given amount pending your personal financial situation (e.g. you receive your annual bonus, gifts, heritage, etc.). My question:
2) Are you aware of such “interest only” mortgages available in Spain?
Thank you very much indeed for some feedback!
Kind regards, vle
January 30, 2012 at 11:39 am #107772ChoperaParticipant
I’m no expert but in my experience nearly all Spanish mortgages are repayment and follow a system that tries to even out the monthly payments during the mortgage term – so at the beginning of the term most of the your monthly payments go towards interest payments and towards the end of the term most of the payments go towards paying off the debt. People not familiar with this system get caught out because they think that after say 5 years of a 25 year mortgage they will have paid off a fifth of the debt when in fact they have paid off much less.
In my experience most Spanish mortgages allow you pay off up to 20% of the debt in any year free of charge, so you can take advantage of any extra money you might have.
I looked into a second residence mortgage last October and got offered 3 year fix at 3.95 % followed by euribor + 1.6% for a 30 year term. At the time the mortgage rates were increasing on a monthly basis so it wouldn’t surprise me if the best you could find now is euribor + 2%.
The problem is that Spanish banks are being forced to recapitalise which makes it difficult for them to give out mortgages, especially interest only ones.
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