Dictionary

Interest rates provided for in variable and mixed-rate mortgage deeds, and which will only apply in cases where the initially agreed benchmark rate ceases to exist.

Person who receives a sum of money and has the obligation to return it, along with the agreed interest, after a set period of time.

The objective value of a property set by the authorities of the municipality (Town Council) where the property is located by applying certain valuation criteria. As a rule of thumb, the cadastral value cannot exceed the property’s market value. The cadastral value is the taxable base used for calculating Property Tax (IBI). Cadastral values may be updated annually by the Town Council.

When the interest agreed in the contract, which is accrued and unpaid, is added to the outstanding loan capital, thus giving rise to further interest.

Document authenticated and issued by the Property Register stating whether the property has any encumbrances.

Generic term used to refer to a notary public or other public officer that can certify public instruments.

Amounts, other than interest, that credit institutions charge customers for their services

Stands for Central de Información de Riesgos del Banco de España (Central Credit Register of the Bank of Spain), and is a public service that keeps a record of practically all of the loans, credits, guarantees and risks that financial institutions have with their clients.

A binding written or spoken agreement between one or more parties creating mutual obligations enforceable by law.

The person or entity to whom money is owed.

This occurs when the borrower (mortgage holder) switches their loan to another financial institution, without having to repay the existing loan and set up a new one. Before it can take place, the debtor and the new financial institution must agree to the transaction.

Law to safeguard and guarantee the fundamental rights and freedoms of natural persons where data processing is concerned, and particularly their right to honour and to personal and family privacy.

This is when the mortgaged property is returned to the lender in exchange for the discharge of the debt, in part or in full, secured by the mortgage. In the event of dation in payment (full discharge of the debt with the return of the property), the debtor’s and third parties’ obligations with respect to the debt will also be discharged.

Refers to the situation where the creditor waives their right to recover a debt, which leads to the total or partial cancellation of the debt obligation.

This is when one mortgage holder (borrower) is replaced by another. It usually occurs when a person purchases a home that is already mortgaged and the new owner becomes the new loan debtor. Before it can take place, the financial institution must agree to the change of borrowers.

A public instrument witnessed and signed by a notary public attesting to the content and thus allowing it to be registered with the Property Register.

A tax levied on documents executed as deeds, which are registrable and require the payment of stamp duty, such as deeds of sale and mortgages.

An amount of money the buyer of a property contributes to the purchase, not including the money borrowed from a third party.

Drawdown refers to the gradual accessing of funds from the line of credit that the bank extends to the customer.

When the debtor repays the loan in full before its maturity date, paying the lender the outstanding capital and the interest accrued up to the time of redemption. Consequently, the relationship between the borrower and lender is terminated.

Loan capital that is repaid before the initially agreed dates. It may be repaid in part or in full.

A percentage of the amount that is repaid early which must be paid to the credit institution.

An amount of money towards the final price of the property that the buyer gives to the seller as a guarantee that the sale will go through before a given date. If the buyer withdraws before that date, they will lose this money.

Limitations on the ownership of a property or in connection with the payment of a debt. They must be registered with the Property Register.

Acronym for ‘European Interbank Offered Rate,’ it is the interest rate at which the main financial institutions lend money to each another on the interbank market. One-year Euribor is the most widely used benchmark rate for variable rate loans, and is published monthly by the Bank of Spain.

A document providing information, personalised for the borrower, on the loan agreement. It allows the borrower to assess and compare the conditions offered so that they can make an informed decision. The ESIS will be considered a binding offer by the creditor for at least ten days.

An amount of money lent. For the purchase of a home, it is usually between 70% and 80% of the property value.

The term used to designate a property in the Spanish Property Register. Each house is referred to as a finca registral.

First registration of a property in the Property Register. When a property is registered for the first time, a registration page is opened and it is assigned a property number.

A loan where the nominal interest rate does not change during the term of the loan, irrespective of variations in the mortgage market.

A loan where the nominal interest rate does not change during the term of the loan, irrespective of variations in the mortgage market.

The contract usually provides that in the event of defaults on the mortgage repayments by the debtor, the lender may declare the loan due and try to recover the defaulted debt and principal by auctioning the mortgaged property. Foreclosure proceedings may be initiated if the debtor is 12 months in arrears with the mortgage repayments (during the first half of the mortgage term) or 15 months (during the second half).

Periodicity with which the interest rate is changed for variable-rate loans.

Period of the loan during which neither interest nor principal are paid.

Person who acts as guarantor for a loan and assumes the borrower’s payment obligations if the borrower fails to pay the principal and/or interest. They are liable with all of their present and future assets.

Guarantee by a third party to repay the loan if the debtor fails to do so.

This refers to a property that cannot be divided.

An amount that the mortgage holder(s) undertake to pay the lender at regular intervals and which is intended to pay off the monthly interest and part of the principal.

An amount paid as remuneration for the use of money lent.

An additional percentage charged on the outstanding balance of a loan and proportional to the days of delay in payment.

A percentage applied to the outstanding loan capital to calculate the interest that the borrower has to pay.

Period of the loan during which only interest is paid and no principal is repaid.

In variable-rate loans, this is the percentage added to the benchmark interest rate at each interest rate review.

The person who gives money to another person, called the borrower, who has to return this amount along with interest.

A claim or legal right against a property.

This is a banking product extended by the credit institution that allows the customer to draw on a credit facility when they need funds up to a specific amount (credit limit) at any time during the period agreed with the bank. The customer must repay the money withdrawn, along with interest and bank charges, on the agreed dates and may also repay the money in part or in full before the due date. They may continue to draw on the facility throughout the term of the line of credit if this has been agreed with the bank.

In variable-rate loans, this is the percentage added to the benchmark interest rate at each interest rate review to obtain the new interest rate to apply.

This is when a debt becomes due and payable.

Draft used to draw up a notarial instrument.

A right in rem established to guarantee the performance of contractual obligations to a third party (loans, bills of exchange). Along with payment of the principal, it guarantees payment of ordinary interest, default interest and the costs and expenses arising from legal claims in the event of non-payment. Though not exclusively, mortgages are typically used to purchase immovable property. They are concluded in a public instrument and the rights are constituted upon registration of the mortgage with the Property Register.

Person obligated to repay a debt with all of their present and future assets.

The sum of all items secured by a mortgage (the loan capital, ordinary interest, interest on arrears and legal costs and expenses).

A sum of money granted, generally by a financial institution, to a natural or legal person which is secured with immovable property.

This is the average interest rate for mortgage loans with a term of more than three years applied by banks for the purchase of a home on the private housing market during the reference month of the index.

The person who pledges the title to their real property as collateral for a loan taken out by them or another person.

The right of an individual (the naked owner) over a property or asset which they own but which they do not have full rights to, given that another person has the limited right to use and enjoy the property (the usufruct).

A financial term that can be defined as the interest rate that indicates the cost or effective yield of a financial product during the term established for the operation.

Unlike the mortgagor and borrower, the non-debtor mortgagor is not obligated to make payment if the borrower defaults on their loan obligation, and their liability does not extend to all of their assets, but merely to the asset given as collateral against the loan.

A public official who witnesses and attests to the content of certain documents and legal transactions (contracts of sale, mortgages, etc.)

The amendment of the loan conditions with the same credit institution that granted the loan in order to change certain conditions such as the interest rate, term or other aspects of the loan.

The value used as a basis for calculating the interest rate in variable-rate loans when reviewing the interest rate. It is obtained and published on a monthly basis by the Bank of Spain and published in the Official State Gazette (BOE). The most widely used benchmark rates are the Mortgage Loan Reference Index (IRPH, by its Spanish acronym) and one-year Euribor.

The amount of the loan that still needs to be repaid.

A loan with no further guarantee than the collateral of the borrower, who is liable for the repayment of the loan with all of their present and future assets.

This document contains clear and sufficient information on the loans offered by the financial institution.

In insurance, this is the amount of money the policyholder pays the insurance company to cover against future, uncertain acts or events called insured events.

This is the nominal amount of a loan or the outstanding amount to be paid off or returned.

A contract or agreement setting out the will of the parties and which is signed without the involvement of a notary or certifying public officer. A private contract is not registered with the Property Register.

A company that arranges the deeds of sale and mortgage loan and their registration with the Property Register.

Document issued by the administrator of the Property Owners Association outlining the debt situation of the current owner with the Association.

Public office where documents relating to properties and rights in rem in immovable property are registered. These documents may be disclosed to the public through the Register.

A document issued by the Property Register stating whether the property has any encumbrances.

Municipal tax levied on the ownership of an immovable property. It is payable once a year and the amount is based on the cadastral value of the property.

Tax levied on second and subsequent transfers of assets that involve the exchange of goods.

A document setting out the will of the person executing it and which is witnessed by a notary public, thus allowing it to be registered with the Property Register.

In variable loans, a review takes place when the interest rate applied changes. It is calculated by adding a margin to the benchmark rate. The review frequency is agreed by the parties.

Each registration that the registrar enters in the Property Register in relation to the life of a property.

This refers to each entry in the Property Register. The most common ones are notifications of submission of documents, cautions, mortgage releases and marginal notes.

The registration stating that there is a mortgage on the property is removed from the Property Register. A mortgage loan may have been fully repaid but still appear in the Register. To have the mortgage removed from the Register, a deed of release must be signed and then registered with the Register to release the lien on the property.

Part or full repayment of a debt.

An amount of the loan capital which is repaid early. It may be repaid in part or in full and is usually subject to a commission charge.

There are different types of repayment systems but the most commonly used in Spain is the ‘fixed instalment’ or ‘French repayment system’. In this system, the instalments to be paid at the agreed frequency (monthly, quarterly, etc.) do not change throughout the life of the loan when it is a fixed-rate loan. In variable-rate loans, the instalment is a fixed amount for the duration of the interest rate period, but will change on the date the interest rate is reviewed and will then remain at that amount until the next review.

An amount of money advanced to cover certain costs, the amount of which is unknown at that point in time. When the invoices are issued, the retainer is settled.

This document sets out the most important terms and conditions of the loan.

Financial institutions may charge a fee in cases where a buyer (with the approval of the bank) decides to take over the existing mortgage on the property they intend to purchase.

An obligation assumed by a person to perform another person’s obligations should the latter fail to do so. The contracting party provides this as a guarantee that the obligation will be performed.

Municipal tax which is levied on the alleged increase in value that the land a property is built upon has experienced between the purchase and the sale dates. It is more commonly known as Plusvalia tax. By law, the seller is required to pay this tax, unless otherwise agreed and stipulated in the deed of sale. The amount will depend on the number of years that have passed since the property last changed hands, the municipality where the property is located, and even its location within the municipality.

A legal or economic action that is subject to taxation.

A document constituting evidence of ownership of a property and describing the date and method of acquisition, in addition to other salient features of the property.

A property is said to be unencumbered when there are no ownership limitations on it. In other words, it is free and clear of any encumbrances such as mortgages, liens, usufructs or other restrictions.

The right of an individual, known as the usufructuary or beneficial owner, to use and enjoy a property owned by another person, known as the naked owner. In the case of a dwelling, the usufructuary is entitled to live in a house belonging to the naked owner. The right of usufruct expires upon the death of the usufructuary.

A tax charged on new-build property transactions. In the Canary Islands, General Indirect Canary Islands Tax (IGIC, by its Spanish acronym) is paid instead of VAT.

The date on which an account entry or a transaction becomes fully effective and which serves as a reference for calculations (interest rates, for example). For operational reasons, the ‘value date’ and the ‘accounting or transaction date’ do not always coincide.

A loan where the interest rate is reviewed at a set frequency. There is usually a predetermined interest rate at the start, a review period (which determines the frequency of the rate change), a benchmark rate (that rises or falls depending on market trends) and a margin or spread (which is added to the benchmark rate to obtain the new interest rate to apply).

A loan where the interest rate is reviewed at a set frequency. There is usually a predetermined interest rate at the start, a review period (which determines the frequency of the rate change), a benchmark rate (that rises or falls depending on market trends) and a margin or spread (which is added to the benchmark rate to obtain the new interest rate to apply).