Repayment Mortgage

Capital and Repayment Mortgage

This is the most common form of mortgages in Spain today. It means that you will pay back an steady amount per month, in which is a part interest and a part pay-back. Because you will pay the same amount each month during the mortgage duration period, at first the amount of interest be the mayor part of the amount and the pay-back very little. Gradually the pay-back part in the fixed amount will increase so that at the end of the duration of the mortgage you will have paid back all.

Interest is normally variable. That means that each 6 months or year the interest percentage will be reviewed and updated according to the conditions in the mortgage agreement. Usually that means in Spain that the interest is connected to the rate that banks pay to each other called the Euribor. This interest percentage will be the base with a extra fixed percentage on top of that rate. So the Euribor might vary but the up-mark is fixed.

It is not uncommon that the banks offer for the first period (e.g. 6 months, year, etc.) an amount of interest not related to Euribor, in order to make it attractive to take that mortgage. After that first period the mortgage will than return to the agreed set-up as explained above. 

Other interest forms are also possible, although more difficult to obtain. 

Such as interest only (mostly for a fixed period, like the first 2 years, after which it returns to the Capital and Repayment form for the remaining period).At the current moment these type of mortgages are very limited by the banks in their supply.