What is a bank account

What is the NIR?

The NIR (Nominal Interest Rate) represents the fixed percentage applied to the outstanding principal of the loan to calculate the interest the institution will receive for lending you the money. It does not include commissions or fees.

What is the APR?

The Annual Percentage Rate (APR) is an indicator that allows you to know the effective cost of your loan. Its calculation mainly takes into account the term of the operation, the nominal interest rate, the commissions and expenses incurred when contracting a specific operation, and the cost of any bundled products required to obtain discounts. It allows you to compare different offers.

What is the grace period?

The grace period is a contractual option that allows you to postpone the payment of all or part of the monthly installment for an agreed period of time. It is a useful flexibility tool to adjust your budget after the purchase, although it could mean a higher total cost of the loan. There are two types:

• Partial Grace (Interest Only): During this period, you only pay the interest generated by the loan. The installment is lower because you are not repaying principal, but the outstanding amount does not decrease.
• Total Grace: No monthly payment is made. The interest generated during this time is added to the outstanding principal (capitalization), which will increase your future installments or the duration of the loan.

What is amortization?

Amortization is the process of repaying the borrowed principal through your monthly installments. In Spain, the standard is the French system, where the installment is constant (as long as the interest rate does not change): at the beginning you pay more interest and, as time goes by, you repay more principal.

• Early repayment: This is repaying part of the principal ahead of time.
• Options: You can choose to reduce your monthly installment (pay less each month) or shorten the term (finish your mortgage sooner).
• At ABANCA, you can simulate and manage these operations directly from your mobile banking to see how your installment or mortgage term changes.

What is the Euribor?

The Euribor is the reference index that indicates the average interest rate at which European banks lend money to each other in the short term. It is the official indicator used in most variable-rate mortgages in Spain. Its fluctuations, set by the European Central Bank, determine whether your monthly installment goes up or down at each annual or semi-annual review.

What is the outstanding principal?

The outstanding principal is the amount of the loan you still have to repay to the bank. It is also known as the "outstanding principal", and represents the actual debt at a given moment, not including future interest if the loan continues as normal.

What is mortgage subrogation?

Subrogation is the process of changing one of the parties in your mortgage contract without having to cancel the current loan and formalize a new one. There are two main types:

• Creditor subrogation: you transfer your mortgage from another bank to ABANCA to improve the interest rate and/or the term.
• Debtor subrogation: The buyer of a property assumes the mortgage that the seller already had, saving on opening costs.

What is mortgage novation?

Novation is the modification of your current mortgage contract, usually to improve its conditions. It allows you to increase the principal, change the repayment term, or switch from a variable to a fixed rate, among other things. It is the most economical option to adjust your loan without having to cancel it and open a new one.

What is the term of a mortgage?

The term is the total agreed time to repay the principal and interest of the loan, which usually ranges between 15 and 30 years (depending on the applicant's profile and the purpose of the property). It works like a balance:

• Longer term: Lower and more affordable monthly installments, but higher total interest cost.
• Shorter term: Higher installments, but you finish paying sooner and save on total interest.

At ABANCA we help you find the ideal balance according to your age and saving capacity.

A mortgage is a long-term loan contract specifically designed for the purchase of a property. Its main feature is the mortgage guarantee: the property itself secures the fulfillment of the obligation. You repay the borrowed capital plus the agreed interest through periodic (monthly) installments. Remember that, in Spain, liability is usually universal. This means that, in addition to the property, you are liable for the debt with all your present and future assets, unless a deed in lieu of payment has been specifically agreed upon.

Fees and Expenses:

The cost of a mortgage is not limited to the monthly installment. Following the entry into force of the Real Estate Credit Contracts Law (LCCI), the distribution of arrangement costs is much more favorable for you:

• Costs covered by ABANCA: We cover the Notary, Registry, and Administration fees associated with the mortgage.
• Costs covered by the Client: You only need to pay for the property appraisal (necessary to determine the guarantee value) and any copies of the deed you request.
• Opening fee: For most of our options, this is €0, eliminating this upfront cost.

• Recurring expenses:

  1. Damage insurance: By law, you must have a policy that covers property damage (fire). At ABANCA, we offer multi-risk home insurance that also allows you to benefit from interest rate discounts.
  2. Account maintenance: You can enjoy your account with no maintenance fees by meeting certain requirements (such as direct depositing your salary).

Interest and Payment Evolution:

The interest rate represents the cost of the borrowed capital. Depending on the option you choose, your payment schedule will follow a different pattern:

• Fixed Rate: You will have the same installment from start to finish, regardless of market fluctuations. This is the ideal option if you seek maximum predictability in your monthly budget.
• Variable Rate: The interest consists of a fixed margin plus the Euribor value. Your installment will be updated periodically (every 6 or 12 months), so the amount of your payment will vary according to changes in this index.
• Mixed Rate: Offers a hybrid solution: an initial period at a fixed rate (providing stability in the early years of your project) and a subsequent period at a variable rate.

How are your payments distributed? (French System)

At ABANCA, we use the French amortization system, the most widespread model in Spain. It works with constant installments (as long as the interest rate does not change):

1. Initial stage: In the first years, most of your installment goes towards paying interest.
2. Progression: Over time, the proportion of interest decreases and the amount allocated to repaying the principal increases.

Remember that in variable and mixed rate options, Euribor fluctuations will directly affect your installment amount at each review, which may increase or decrease depending on the market.

Requirements and Necessary Documentation:

To ensure your project is solid and sustainable, we conduct a solvency study based on the principle of responsible borrowing. The goal is to ensure that your mortgage payment, together with other financial commitments, ideally does not exceed 30-35% of your net monthly income.

1. Documentation according to your profile:

• Salaried employees: DNI/NIE, employment history, last 3 payslips, and employment contract.
• Self-employed: Annual and quarterly VAT returns, Social Security payments, and the last 2 income tax returns (IRPF).
• Other income: Rental contracts or proof of additional income.

1. Savings capacity and solvency:

• Spending profile: Bank statements from the last 3 to 6 months.
• Required savings: You must provide 20% of the property value (we finance up to 80% LTV) plus approximately an additional 10% for expenses and taxes.

Having your bills up to date and no other active loans will speed up the approval of your application at ABANCA.

Security and Protection:

A mortgage is a long-term commitment. Therefore, it is essential to have mechanisms that protect both the ownership of your home and your family's financial stability in unforeseen situations:

• Associated insurance: * Damage (Fire): The only insurance required by law (damage and fire) to protect the value of the property.
• Life or Payment Protection: Optional, but recommended to cancel the debt in case of death, disability, or unemployment. In addition, taking out these policies usually gives access to interest rate discounts.
• Guarantees and flexibility: The property is the guarantee for the loan. If difficulties arise, there are solutions such as novation (renegotiation of terms) or grace periods, always subject to review and approval by the institution. The goal is to find an agreed solution before reaching a default situation.
• Security tips: Always use official ABANCA channels. Do not share online banking credentials and always check the simple registry note before making any down payments.

The best mortgage is not the one with the lowest interest rate, but the one that best fits your financial situation and future plans. To make the right choice, you need to balance three factors: your previous savings, your risk tolerance (fixed vs. variable), and long-term costs. At ABANCA, we help you compare with complete transparency so you can take control of your investment.

Factors to compare: What should you look at?

To compare properly, don't just focus on the monthly payment. These are the key points:

• NIR vs. APR: The NIR (Nominal Interest Rate) is the interest rate applied to the principal, but the APR (Annual Percentage Rate) is the real indicator, as it includes fees, expenses, and costs of associated products.
• Fees and flexibility: If you plan to pay off your debt early, look for mortgages with a low early repayment penalty.
• Upfront costs: Be clear about how much cash you need for the appraisal and purchase taxes before you start.

Tips according to profile:

There is no such thing as "the best mortgage," only the one that best fits your current life situation. Here are the strategic keys according to your situation:

1. First-time buyer: The biggest challenge is the initial savings (30% of the value). Tip: Check the conditions in the “Pre-contractual Product Information Sheet” and request an initial grace period to adjust your first payments, keeping in mind that this will mean a higher total interest cost on your mortgage.
2. Families: The priority is to avoid market fluctuations affecting the household budget. Tip: A fixed-rate mortgage is the reference option to avoid surprises with the Euribor and to plan the household budget in the long term.
3. Self-employed: You must prove income stability during the risk analysis. Tip: Prepare your VAT and income tax (IRPF) returns in advance. At ABANCA, we have expert teams to analyze the health of your own business.
4. Young people (<45 years old): They are solvent but have little accumulated savings. Tip: Find out about the Young Mortgage and guarantee programs (such as those from the ICO) that make it easier to access higher financing percentages.
5. Investors and second homes: They seek asset profitability. Tip: Keep in mind that financing is usually lower (60-70%). Look for mortgages without early repayment penalties to maintain flexibility.

Taking out a mortgage is a long-term commitment that requires clarity and foresight. Often, the desire to own your home can make you overlook technical details that will affect your finances. At ABANCA, we want your signing to be the start of a peaceful stage, based on an informed and secure decision.

Maximum transparency

At ABANCA, clarity is the foundation of our relationship with you. Since the Real Estate Credit Contracts Law (LCCI) of 2019, the legal framework ensures that conditions are clear and balanced. Even so, it is essential that you fully understand your ESIS (European Standardised Information Sheet) to plan your finances in the long term.

Key points for a safe signing:

• Guaranteed cost allocation: According to current law, ABANCA covers the costs of Notary, Registry, and Administration. You only pay for the Appraisal and any copies of the deed you request.

• Early repayment fees: If you decide to repay capital early, the fees are limited by law to protect your savings. We recommend checking the maximum percentages in your ESIS to plan for future repayments.

• Assessment of associated products: When comparing offers, analyze how insurance or linked products affect the APR. Transparency means understanding whether the interest rate discount compensates for the cost of the associated services.

ABANCA Recommendation: Your right to review

Take advantage of the 10-day legal reflection period (14 days in Catalonia) from the moment you receive the ESIS. This is your time to analyze every detail. If you have any doubts about a clause, ask your advisor for a simulation of different scenarios (such as a rise in the Euribor for variable-rate mortgages) to see the real impact on your payment.

Read the fine print and review all conditions

Signing a mortgage is a long-term commitment where transparency must be total. At ABANCA, we make sure you understand every clause and condition before you attend the final signing of the mortgage.

Practical recommendations before the final signing:

• Take advantage of the 10 days (14 in Catalonia) for reflection: After receiving the ESIS (binding offer), the law grants you 10 calendar days (14 in Catalonia) to study the document and verify that it matches what was agreed.

• Review the preliminary Notarial Record: This is mandatory and free of charge. The notary must explain concepts such as the margin, fees, or early maturity to ensure you understand them.

• Analyze the impact of discounts: Check how much your monthly payment would increase if you stop meeting requirements such as direct depositing your salary or taking out home insurance on the property.

ABANCA Recommendation: If a technical term causes you doubts, ask your advisor for a numerical example. Seeing how it affects a real bill is the best way to understand its impact.

Calculate your real payment capacity and plan for the future

A mortgage should be a boost to achieve your home, not a burden on your finances. The most common mistake is to assess the viability of the loan based only on current income, without allowing for unforeseen events.

1. The 35% golden rule To keep your finances healthy, the sum of all your debts (mortgage + other loans) should not exceed 35% of your net income.

• Example: If the household earns €2,500 net, the ideal maximum payment is €875.

2. The "Stress Test"

If you choose a variable-rate mortgage, do not calculate your capacity based only on the current Euribor.

• Recommendation: Simulate what would happen if the interest rate rose by 2 or 3 points. If in that case the payment exceeds 45% of your income, consider reducing the loan or choosing a fixed rate for greater stability.

3. Expenses beyond the payment:

Remember that being a homeowner involves additional annual costs:

• Taxes: Property tax (IBI) and waste collection fee.

• Housing: Community fees and possible special assessments.

• Maintenance: Insurance and minor repairs.

ABANCA Tip: Before applying for the mortgage, do a "real simulation". For three months, save the exact difference between your current rent and what your future mortgage payment would be. If you can maintain this habit without compromising your well-being, you will have validated your real payment capacity.