Buying in Spain - Glossary of Legal Terms

The information provided on this page is generic and for general guidance only While we endeavour to provide accurate information - the subjects of Spanish Property, Immigration Laws and Taxes is complex and subject to change. ALWAYS consult a Lawyer before proceeding with any Legal Contract or Move.

Glossary:

A  B  C  D  E  F  G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  X  Y  Z    

A

Repayment of the initial loan amount by means of a scheme of installments, including a repayment of capital borrowed and an amount for the interest charged. According to the type of mortgage, these installments can be fixed for the whole life of the loan or vary with interest rate fluctuation.

C

Repayment of the initial loan amount by means of a scheme of installments, including a repayment of capital borrowed and an amount for the interest charged. According to the type of mortgage, these installments can be fixed for the whole life of the loan or vary with interest rate fluctuation.

D

This is a set value throughout the term of the mortgage which is usually expressed in percentages or fractions and which is added to the value of the reference rate to calculate the interest rate for each revision for variable rate capital repayment mortgages.

E

The Escritura is the title deed containing a detailed description of the property and proof of ownership. This document legalises the purchase and shall be signed by both contracting parties and by the notary. The purchaser obtains a first copy of the deed once all taxes have been paid and the corresponding inscription in the Property Register has been done. If the property is a re-sale property then the Escritura will also contain the property's recent history and previous details of ownership.

European Inter-Bank Offered Rate, an index based on the interest rate for deposits in Euros at 12 months that is published by the European Central Bank and commonly used as reference rate for variable rate mortgages.

G

The professional adviser who looks after dealings with the Register and the payment of taxes to the Tax Authority.

H

A legal charge entered in the Property Register when a real estate property is assigned to be collateral for a mortgage loan.

I

This tax is payable on sales transactions subject to VAT and mortgage loans, at a rate of 0.5% on total coverage of the mortgage or on the deed amount in the case of sales subject to VAT.

Sales made directly by a developer (newly built homes) are subject to VAT. The current standard rate is 7% on the sales value in case of private use and 16% in case of commercial use. In some autonomous regions like in the case of the Canary Islands the rate might vary.

This tax is payable instead of the VAT when the property is not newly built. In this case, the standard rate of 7% is independent of the assigned use of the property, but there are regional differences.

This base rate is, on variable rate mortgages, used to calculate the new interest rate when it is reset. Our advice: Pay attention to the fact that the reference rate, together with the margin, determines the amount of the future installments.

That is the nominal interest rate. It has to be specified in the contract whether the rate is fixed or variable throughout all or part of the loan.

Índice de Referencia de Prestamos Hipotecarios = Similar to the EURIBOR, this rate is used as reference for variable rate mortgages and published by the Banco de España. It represents an average rate for mortgages offered by all Spanish financial entities.

N

The Notary acts as the public official when signing the public deeds, who places on public record through the title deed the sale and ownership of a property and/or mortgage loan agreement. He is obliged to ensure that current legislation is fulfilled and to defend the interests of the parties, particularly the borrower’s interests. It must be signed in his presence and must be understood by both parties.

O

An overview of the financial terms of loans on property offered by financial institutions. The Ministerial Ordinance of May 5th, 1994 regarding transparency of mortgage loans, stipulates the obligation of making a binding quotation for each mortgage loan, which meets the following specifications:
• The borrower must be an individual person.
• The collateral must be a privately used home.
• The amount must not exceed €150,000.
The binding quotation must indicate that if the borrower accepts the quotation, he will have the right to examine it at the notary’s office, for three working days before the signing of the mortgage contract.

P

This means the frequency of interest rate resetting on variable rate mortgages, which are usually carried out once or twice a year.

The period of time during which the loan capital and the corresponding interest have to be repaid.

Usually known simply as Hipoteca (mortgage), this is a loan granted by a lender and backed by a property.

R

The Land Register contains all acts, contracts or legal charges referring to a property, such as ownership or encumbrances. Registro de la propiedad is also the local department responsible for maintaining the Land Register, i.e. the Land Registry. After the escritura (title deed) has been signed it will be sent to the local land registry office. It will be entered onto the register and the land registry fees will be paid. Your solicitor will make payment of the fees and when the completed deeds are ready he will arrange to have them sent on to you.

S

If you have already a mortgage, but another lender offers you better terms and conditions for your mortgage, you can remortgage, i.e. transfer the mortgage and all the corresponding rights to this new lender. This transaction is tax-free.

This is a substitution of the debtor’s mortgage. That is to say, when the person who buys a mortgaged property takes responsibility for all debts and encumbrances that the seller had towards the financial institution that conceded the mortgage.

T

This represents the effective cost of a loan calculated as if it were paid as one single repayment each year. It has to be indicated on any loan offer to make it easy to compare different loan offers with different characteristics (interest rate, commissions, reference rates, margins, etc.).Our advice: All offers must indicate the TAE value. It will help you compare with other products and make the best and most profitable decision.

An independent surveyor company carries out the valuation of the property in order to determine the current value of the home within the property market and to specify the maximum amount that can be financed. The valuation is valid for six months after the date of issue. Our advice: It is important to ask for a copy of the valuation. It is a service you pay for and you have the right to demand a copy.

V

That is the examination of the Land Register records of a property, verifying the legal owner and the existence of charges, such as mortgages, encumbrances etc. The document where all this is reflected and that must be presented to the bank is the “Nota simple de cargas”.

If you've know of a useful term (to this list) which isn't listed above, please feel free to contact us directly and we will add it to the list.

The information provided on this page is generic and for general guidance only Whilst we endeavour to provide accurate information - the subjects of Spanish Property, Immigration Laws and Taxes is complex and subject to change - ALWAYS consult a Lawyer before proceeding with any Legal Contract or Move.

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