Mortgage fees, bonuses and linked products you may be offered

Terms used

• FEIN — The FEIN is the bank's standard pre-contract information sheet for a mortgage offer, showing rate, costs and conditions.
• TIN — The TIN is the nominal interest rate of the loan, before fees and required extras.
• TAE — The TAE is the yearly total cost of the loan as a percentage, including the rate and required extras.
• AJD — The AJD is stamp duty, a tax on signing certain notarised deeds such as a mortgage deed.
• Bonificación — A bonificación is a rate reduction the bank gives if you take linked products.
• Nómina — A nómina is a payslip; banks may ask for your salary to be paid into your account with them.

Key rules

• Fixed-rate early repayment: On fixed-rate mortgages signed after June 2019, the early repayment fee is capped at 2% of the capital repaid in the first 10 years and 1.5% afterwards.
• Mortgage deed tax: The bank pays the stamp duty (AJD) on the mortgage deed.
• Linked products: A bank cannot force you to buy other products, but it can offer a lower rate if you choose to.
• Insurance: If the bank requires home insurance, you can choose any insurer with equivalent cover.
• Compare: Compare the TAE and the yearly cost of required extras, not just the headline rate.

The real cost is more than the rate

A low headline rate can hide costs. To compare offers fairly, put the same items side by side for each bank. Use the FEIN, the bank's pre-contract information sheet, as your source.

Compare these:

• Rate type and TIN (the nominal interest rate). For a variable loan, also the spread and the index.
• The TAE, which folds the rate and the required extras into one yearly cost.
• Opening fee and appraisal fee.
• Loan term and monthly payment.
• Required linked products and what they cost you each year.
• Early repayment fees.
• Fees to move the loan to another bank later.
• Notary, registry and tax costs.

Who pays the deed costs

The bank pays the stamp duty (AJD) on the mortgage deed, plus the registry fees for the mortgage and the gestoría fees. The bank also pays the first copy of the deed. This applies to consumer home loans.

You pay the valuation and any extra copies you ask for. You also pay the notary fees for the purchase deed, while the bank pays them for the mortgage deed. If the purchase itself is subject to AJD, you pay that on the purchase deed.

Linked products and rate bonuses

A bank cannot make your mortgage depend on buying other products. It can offer a lower rate, a bonificación, if you choose to take them. The FEIN and the contract must state the conditions and show how much each one changes the rate.

Banks typically ask for:

• Your payroll (nómina) paid into the bank.
• Home insurance and life insurance.
• Sometimes a pension plan or investment fund.
• A credit card with a minimum yearly use.
• Utility bills paid by direct debit, and sometimes a minimum number of transactions.

Each product usually cuts the rate by roughly 0.1 to 0.5 percentage points. A full package can cut it by about 1 point or more. The bank's insurance often costs more than the market, so the saving may be smaller than it looks.

Work out the net saving: the interest you save each year minus the extra cost of the products. If the net is small, the bonus may not be worth the lock-in. If the bank requires property insurance, you can use any insurer with equivalent cover. The choice between taking and declining the products is in the decision below.

Early repayment fees

You can repay early, but the bank may charge a fee. The limits depend on the loan type and apply to mortgages signed after June 2019.

• Fixed rate: the fee is capped at 2% of the capital repaid in the first 10 years and 1.5% afterwards.
• Variable rate: the cap is 0.25% of the capital repaid in the first 3 years, or 0.15% in the first 5 years. The contract says which option applies. After that, no fee applies.

Check the draft contract for the option before you sign. Mortgages signed before June 2019 follow other rules.

Before you choose

Ask each bank for its FEIN and read the linked-product conditions and the early repayment fee. Then compare the TAE and the yearly cost of the extras. The documents and FAQ below cover what to collect and common questions.

Choosing between options

Should you take the bank's linked products for a lower rate, or decline them?

• Take the linked products: The total yearly cost of the premiums, card and other conditions is lower than the interest you save, compared with equivalent products you could buy elsewhere.

• Decline them and keep the higher rate: The premiums cost more than market alternatives, or you do not want to move your payroll or stay tied to the bank's products.

• Take only the home insurance with another insurer: The bank requires property insurance but you can find equivalent cover cheaper, which the rules allow.

Add up what the linked products cost each year and subtract the interest they save. Choose the option with the lower total. For a variable-rate loan, also check the early repayment fee: 0.25% of the capital repaid in the first 3 years or 0.15% in the first 5 years, then none.

Documents you need

• The FEIN, the bank's pre-contract information sheet, for each offer. It must state the conditions of any rate reduction and quantify its effect on the rate.

• The draft mortgage contract, which must say which early repayment fee option applies on a variable-rate loan: 0.25% in the first 3 years or 0.15% in the first 5 years.

• A home insurance policy from any insurer you choose, with cover equivalent to what the bank requires, if the bank asks for property insurance.

• Recent payslips (nóminas) if you take a rate reduction for moving your payroll to the bank.

Frequently asked questions

Which deed costs does the bank pay and which do I pay?

The bank pays the registry fees for the mortgage and the gestoría (the agent who handles the paperwork). You pay the valuation and the purchase deed notary fees.

Can a bank refuse me a mortgage if I do not buy its insurance?

No, a bank cannot make your mortgage depend on buying other products from it. It can offer a lower rate if you choose linked products, and it can require home insurance, but you may pick any insurer with equivalent cover.

How much does each linked product usually cut the rate?

Each linked product usually cuts the rate by roughly 0.1 to 0.5 percentage points, and a full package by about 1 point or more. Insurance premiums often cost more than market alternatives, so work out the net saving before accepting.