Explaining Mortgage Terms

During the boom times it was easy to get a mortgage in Spain – probably too easy! Now you need good advice from recommended and highly regarded Mortgage Brokers. Understanding the terms and expressions used is key too.

• Cut through the jargon

• Raising cash? Look at PRP (See below)

• Shop around, use a recommended broker

For further reference, please also read http://expatsfrombritain.blogspot.com/2010/11/spanish-mortgages.html

Advice

A recommendation about the most suitable mortgage for you made by an adviser. Remember that mortgage advice is regulated in the UK but not regulated in Spain. To receive a recommended adviser click here. Always be wary of advisers who want a large up front fee.

Annual statement

A statement from your mortgage lender, sent every year, showing among other things, the repayments made and the outstanding balance owed.

Approval in principle

A certificate which some lenders will give you that shows the amount they will probably be prepared to lend you. This is not a guarantee, but can be helpful when signing up with estate agents. Since the advent of the credit crunch, these are much more difficult to obtain.

Buy-to-let mortgage

A loan taken out to buy a property which is intended to rent to tenants.

Capital

The amount available to borrow, or borrowed, to help buy the property.

Capped mortgage

A mortgage that has a maximum limit on the interest rate to be paid during a special deal period.

Cashback mortgage

A mortgage that comes with a cash sum (often a percentage of the amount being borrowed).

Deposit

The amount of money being put into buying a property (not including the mortgage money being borrowed).

Discounted mortgage

This has a discounted variable rate of interest for a set period, after which the rate will increase.

Early repayment charge

A charge payable if the mortgage deal is settled ahead of time.

Fixed rate

An interest rate that is fixed (i.e. it doesn't move up or down) for a set period of time.

Income multiples

The factor by which earnings are multiplied to find out how much can be borrowed.

Interest

The charge made by lenders to borrow the money.

Interest rate

The figure that determines how much interest is paid.

Interest-only mortgage

A mortgage where you only pay the interest charges of the loan each month. This means you are not reducing the loan amount (or capital) itself, and this will need to be repaid in some other way.

Loan-to-value

The percentage of money you want to borrow compared to the cost or value of the property.

Mortgage

A loan which is secured against the property.

Mortgage broker

A mortgage broker helps clients to understand the various mortgage types and deals available. To receive the recommendation of an excellent Mortgage Broker please emailme.

Pension Reciprocation Plan (PRP)

This is the use of UK pensions to borrow the equivalent of 50% of the funds, in cash, for any reason. This includes creating or increasing deposit for house purchase. PRP is not widely available but you can be put in touch with an adviser by emailing me.

Remortgaging

The process of changing your mortgage for a different one, without moving home. In the right circumstances this might be done to find a more competitive arrangement.

Repayment mortgages

A mortgage that pays off both the home loan and the interest at the same time.

Standard variable rate mortgage

A loan at the lender's normal mortgage rate – i.e. without any discounts or deals.

Secured Loan

A mortgage is a secured loan. This means that if you fail to repay it, your lender may be able to sell your home to get its money back.

Survey

A report on the condition of the property being purchased.

Tracker mortgages

A mortgage with an interest rate that is usually linked to a particular rate that is set independently from the lender and moves up or down with it. The most common tracker mortgages in Spain are Euribor linked. Euribor is the wholesale money market for Euros.

Term

The length of the mortgage.

Valuation

A brief inspection, for the benefit of the lender, of the home being purchased. This is to make sure they are not lending more than the property is worth and that the property is suitable security for the mortgage. It also checks that the property exists!

Please remember that in Spain, unlike the UK, mortgages are NOT regulated products. This means that that you must be careful who advises you. If your first instinct is to use a bank then you will not get advice, merely a product sale. Maybe a comparison from a recommended adviser. Please email me for a contact.