Taking out a mortgage
Things to consider before taking out a mortgage:
- The total cost of each mortgage offer (interest rates, bank fees and charges).
- Not only the total amount of the mortgage, but also the amount of the instalments.
- The currency of the mortgage.
- The mortgage term.
- Whether the bank offers better conditions - as a bonus - if you arrange additional products.
You can obtain this information by looking at the promotional materials, which should be clear and truthful.
- Mortgage loan advertisements should, when they highlight an interest rate or other figures relating to its cost, include information on loan conditions such as the name of the lender, the interest rate, cost details, expenses, the loan amount, APR, etc. They should also include a representative example which it is important to check.
- In any event, you can ask the bank for information on the loans they offer to potential customers. They will use a pre-contractual disclosure document for this purpose. This is the form established under transparency regulations for the bank to provide, free of charge, general but detailed information on the mortgages it offers.
Prior to granting the loan, your bank will:
- Conduct a viability study to determine your ability to pay. Among other things, it will check your current and foreseeable income, assets, expenses and commitments. An appraisal of the collateral will be made, although your solvency will not be predominantly based on its value.Study your creditworthiness to determine your ability to repay the mortgage
- Request permission to run a credit check via the Banco de España’s Central Credit Register (in Spanish)Abre en ventana nueva (CIRBE by its Spanish abbreviation) and other Spanish bad debt registries (RAI and ASNEF by their Spanish abbreviations).
After assessing your solvency, the bank will inform you of its decision to grant the loan or not. If it considers the transaction viable, it is required to provide you (at least ten days before signing the contract) with itemised information so you can make comparisons and come to a decision. The European Standardised Information Sheet (ESIS) is the standard form established under transparency regulations for banks to provide, free of charge and as a binding offer, detailed information about the mortgage.
The bank will also provide you (with the same ten-day advance notice) with a standardised warning sheet informing you, where necessary, of clauses relating to official reference indices, minimum interest rate limits (floors), early termination in the event of default, allocation of expenses, whether it is a foreign currency loan, etc.
In the case of a variable rate mortgage, a separate document will be made available detailing the regular instalments to be paid under different interest rate scenarios.
The bank must also provide you with the following, together with any other information required, ten days in advance:
- A copy of the draft contract
- Information on the allocation of expenses (you will pay for the appraisal and the bank will pay notary, registry and agency fees and taxes)
- The terms of collateral protection insurance or collateral required by the bank
- The warning on the notary public’s obligation to provide you with advice
All of these matters and the foregoing documentation must be verified by the notary public, who will draft minutes, free of charge, attesting to compliance with all the requirements and providing advice to the borrower –and surety, if any– no later than the day before the loan agreement is entered into. The notary public will substantiate your conformity and will ask you to sign the minutes (which will be mentioned in the deed) declaring that you have received all the documents and pertinent explanations. Compliance with these requirements will be reviewed for the purpose of registering the property in the property registry.