Tancrede de Pola (OP Columnist)
SPAIN’S property market is bouncing back fast with home sales up 25.6% year-on-year and a 10.5% increase on February’s total, according to the National Statistics Institute.
It is a very good time to invest, but borrowers need to keep their eyes open.
With an array of banks battling to offer the most attractive mortgage rates, it’s easy to get carried away.
That is where a broker becomes essential: someone in your corner to highlight any hidden fees or compulsory add-ons tucked away in the small print and to ensure you get the best possible mortgage rate to suit your needs.
One of the biggest pitfalls can be ‘trap-related products’ that often get hidden in the small print.
These additional products get attached to your mortgage and usually include insurance policies.
It is important to know exactly what is attached to your mortgage. What may seem like a great rate can be soured by expensive – and sometimes unnecessary – insurance packages.
Using a broker will save both time and money as they will be looking out for these hidden add-ons and will always look for ways to lessen their impact.
And while the vast majority of banks specify the fees and commissions they charge, not all of these costs are always declared.
Many financial institutions refrain from publishing less known fees such as early redemption charges. These are, however, regulated by law, and may not exceed 0.25% for the first three years, 0.15% in years four and five and 0% from the sixth, for variable rate mortgages. For fixed rate mortgages (normally only reserved for euro earners), the penalty is 2% during the initial 10 years and 1% thereafter.
It is advisable to ask the bank to specify all commissions and how many there are before signing the contract. This will spare you unwanted surprises down the road.
But the best way to ensure a good mortgage that does not hide anything in the fine print is to solicit the help of a mortgage broker.
When it comes to picking a mortgage, you may only get one shot as it is virtually impossible to reverse a decision that goes against you. Once you sign the mortgage deed at the notary it is set in stone, as remortgaging and equity-release is all but impossible with Spanish banks.
