Source: El Periódico

Buying your first home is one of the most significant decisions in a person’s life. This process often involves obtaining a mortgage loan. In fact, the majority of home purchases—54.7%—required mortgage financing, according to the latest data from the General Council of Notaries. However, many buyers are unfamiliar with the basic terminology before they begin the mortgage application process.

Therefore, Hipotecas.com has compiled a guide with 13 essential mortgage terms that everyone should know before starting the home buying process. Josep Vera, Business Development Director at Hipotecas.com, an online channel of Unión de Créditos Inmobiliarios (UCI), emphasizes that “buyers need to be clear not only about the different loan options but also about the entire language and terminology related to mortgages to negotiate and make an informed decision.”

Euribor

• Description: One of the most frequently heard economic terms, especially after the recent interest rate hikes by the European Central Bank (ECB). This index, also known as the Euro InterBank Offered Rate (Euribor), refers to the interest rate at which European banks lend money to each other. It is also the most commonly used index for adjusting variable mortgage rates.

Binding Offer

• Description: This is the document provided by the bank or lending institution outlining the terms and conditions of the mortgage loan that they commit to offering to the client.

FEIN (European Standardized Information Sheet)

• Description: The updated version of the old FIPER, this document provides a detailed and personalized reflection of the loan conditions based on the client’s profile. It must be delivered by the financial institution during the pre-contractual phase.

FIAE (Standardized Warning Sheet)

• Description: This document details the clauses applicable to the mortgage contract and the risks associated with them.

Amortization Schedule

• Description: A table or payment calendar that shows all details related to the repayment of the mortgage loan, including any revisions if it is a variable-rate mortgage.

Amortization Period

• Description: The agreed-upon time frame for paying off the entire loan. In Spain, the average duration is around 24 years, according to the National Institute of Statistics (INE).

Mortgage Costs

• Description: Refers to the costs of documenting and registering the mortgage, including the appraisal, notary fees, the Tax on Documented Legal Acts, and registration costs. The total sum is approximately 10% of the property’s value. The financial institution should provide clear information on the breakdown of costs attributable to the institution and the client.

Interest Rate

• Description: The percentage charged by entities for lending money. This rate is applied to the borrowed amount and determines the number of installments or monthly payments needed to repay the debt. There are fixed-rate loans, where the interest rate remains unchanged throughout the amortization period, variable-rate loans, where the interest rate is adjusted periodically (every 6 or 12 months) based on a market index such as the Euribor, and mixed loans, which combine both fixed and variable rates.

TIN (Nominal Interest Rate)

• Description: A fixed percentage paid to the institution for the capital lent.

TAE (Annual Equivalent Rate)

• Description: A percentage indicator that shows the effective cost of a financial product. For a mortgage loan, it includes the interest rate, fees, and commissions, but does not cover costs not paid to the financial institution, such as notary, administrative, or registration fees.

Loan To Value (LTV)

• Description: A ratio expressed as a percentage that represents the difference between the amount of money lent by the institution and the value of the property being mortgaged, which serves as collateral for the loan.

Mortgage Payment

• Description: The amount the borrower pays to the bank each month, which includes the principal and interest.

Discounts

• Description: Some institutions offer improved loan conditions in exchange for the purchase of additional products such as salary deposits, utility payments, insurance, credit cards, or pension plans.