[Anonymous]

I have been told that, because of the Eurobor being at an all time low, monthly mortgage payments will be decreasing quite substantially. I have asked our Spanish Bank to give me an indication of how much ours will be upon review in January 2010 and they have said that we have a minimum interest mortage rate of 4.98% and ours will not be decreasing at all. We were not aware of this and wonder if this is correct?

[Anonymous]

Without seeing your mortgage contract we´re in no position to give you advice but the kind of contract you appear to have is a pretty standard one.

[Anonymous]

Please refer to Collar & Cap mortgages.

[Anonymous]

Yep, as Shakeel mentioned, it’s called a collar.

Euribor 12 is used to set variable rates on many mortgages here, but the lenders can specify a minimum & maximum rate too.

[Anonymous]

Are most spanish mortgages given on this basis and can we change to a variable rate? This was not explained to us when we originally purchased but then a lot of things weren’t explained properly to us and, being new to the game, we didn’t think to ask.

[Anonymous]

Most Spanish mortgages are Eurobor + (0.5~1.75)% ish.

Mine was revised at the peak last year in October and hence I have been paying 6.2% all year.

Now revised down to 2.2%

When did you take out your mortgage and what is the lowest rate it has ever been?

[Anonymous]

I’m not in a position to say if “most” are, but I believe it to be very common.

Of course where the cap & collar are set varies quite a lot from one mortgage to another, it definitely pays to shop around.

These mortgages are variable rate. You could consider moving to another lender with better conditions, but that can be expensive as your bank will probably have charges for closing the mortgage early. You may also be able to negotiate a better deal with your bank, they will often charge for this too. But in the end it may be worth it.

[Anonymous]

We took the mortgage in January 2007. Not sure what the interest rate was at the time but were paying around 380 euros for the first year on an 80,000 mortgage, 480 for the second year and then this year (Jan 2009) it dropped to 415 euros. Apparently when we were paying 480 the rate was about 6.25% then it dropped last January to our (as we now know) minimum rate of 4.29%.

[Anonymous]

I think your figures (of interest rates) are a little off

The rates for your payments are as follows:-

Year 1
Interest rate 3.0% gives a 380 Euro payment

Year 2
Interest rate 5.4% gives a 480 Euro payment

Year 3
Interest rate 3.8% gives a 415 Euro payment

(The rates for year 2 and 3 will be in error by a very small amount as I made a small approximation).

So you are already paying less than 4.29%. Also the interest rate quoted for the first year is well below 4.29% so there was no cap applied there either.

Has something been lost in translation!!!

(Calc assumes 25 year mortgage and no life insurance part quoted in your figures).

[Anonymous]

Will the bank be able to clarify all of the interest rates for me if I ask them?

[Anonymous]

Yes the bank should. What should & what should not is another story in Spain. No harm in approaching them. They will not bite.

[Author]

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