Mortgage Glossary

Key mortgage and financial terms explained in plain English, with a focus on the Spanish mortgage market.

Amortization

The gradual repayment of a loan through regular instalments. In a mortgage, each monthly payment includes an amortization portion that reduces the outstanding principal and an interest portion.

Amortization Schedule

A detailed table showing each monthly payment broken down into principal, interest and remaining balance over the full life of the loan. You can generate one instantly with our mortgage calculator.

APR (Annual Percentage Rate)

The total annual cost of a mortgage expressed as a percentage, including interest, fees and tied-product costs. In Spain this is called the TAE. It is the best single figure for comparing offers from different lenders.

Capital / Principal

The amount of money the bank lends you. Interest is calculated on the outstanding principal, which decreases each month according to the amortization schedule.

Collateral

The asset pledged as security for the loan. In a mortgage, the property itself serves as collateral: if the borrower defaults, the bank can seize and sell it to recover the debt.

Early Repayment

An extra payment made to reduce the outstanding principal ahead of schedule. It can be partial (choosing to shorten the term or reduce the monthly payment) or total (full cancellation). See our early repayment guide for detailed strategies.

Early Repayment Fee

A charge applied when you pay off part or all of the mortgage early. Spanish law (Ley 5/2019) caps this at 2% for fixed-rate mortgages in the first 10 years and 0.25% for variable-rate mortgages in the first 3 years.

Euribor

The Euro Interbank Offered Rate, the benchmark rate at which European banks lend to each other. Variable-rate mortgages in Spain typically reference the 12-month Euribor, which is published daily and officially averaged each month.

FEIN (European Standardized Information Sheet)

A binding document the bank must provide before signing, detailing all personalised mortgage conditions. In Spain you have at least 10 days to review it before committing.

Fixed Rate

A mortgage whose interest rate stays the same for the entire term. Monthly payments are predictable, but typically start higher than variable-rate equivalents. Learn more in our fixed vs variable guide.

Guarantor

A person who agrees to repay the mortgage if the primary borrower defaults. Banks may require a guarantor when the borrower does not meet certain income or credit requirements on their own.

Home Insurance

An insurance policy covering damage to the property. Spanish law requires at least fire coverage for any mortgaged home. Banks often offer it as part of a tied-product package.

Interest

The cost the bank charges for lending you money, calculated as a percentage of the outstanding principal. In French amortization (the standard system in Spain), the interest portion of each payment decreases over time as the principal shrinks.

Life Insurance

A policy linked to the borrower that pays off the remaining mortgage in the event of death or, in some cases, permanent disability. It is not legally required in Spain, but many banks offer an interest-rate discount if you take it out.

LTV (Loan To Value)

The ratio of the loan amount to the appraised value of the property, expressed as a percentage. Spanish banks typically finance up to 80% LTV for a primary residence.

Mixed / Hybrid Mortgage

A mortgage that starts with a fixed rate for an initial period (commonly 3 to 10 years) and then switches to a variable rate linked to the Euribor for the remainder. Compare all three types in our fixed vs variable guide.

Mortgage

A long-term loan used to purchase property, where the property itself acts as collateral. In Spain, mortgage terms typically range from 15 to 30 years and are repaid using the French (constant-payment) amortization system.

Nominal Interest Rate (TIN)

The pure annual interest rate applied to the outstanding principal, excluding any fees or extra costs. This is the figure used to calculate the monthly payment. Do not confuse it with the APR, which reflects the total cost.

Novation

Renegotiating the conditions of your mortgage with the same bank, such as changing the interest rate, term or type. It usually involves a fee but avoids the higher costs of switching lender through subrogation.

Prepayment

Any payment of principal made before it is due, either as a lump sum or through increased regular payments. Prepayment reduces the total interest paid over the life of the loan. Use our early repayment calculator to see the savings.

Spread / Differential

The fixed percentage a bank adds on top of the Euribor in a variable-rate mortgage. For example, if the spread is 0.75% and the Euribor is 3%, your nominal interest rate will be 3.75%.

Subrogation

Transferring your mortgage to a different bank that offers better conditions, without cancelling and opening a new loan. The original deed is kept but the terms are updated.

Surveyor's Valuation (Tasación)

An official property appraisal carried out by a firm authorised by the Bank of Spain. The lender uses the lower of the appraised value and the purchase price to determine the LTV.

Tied Products / Bonifications

Products a bank offers in exchange for lowering your interest rate, such as direct-depositing your salary, taking out home or life insurance, or using their credit cards. Always compare the combined cost before accepting.

Variable Rate

A mortgage whose interest rate is recalculated periodically (usually every 6 or 12 months) based on the Euribor plus a fixed spread. Payments can go up or down with market conditions. See our fixed vs variable guide for a full comparison.