A mortgage is a financial product through which the bank . In return, you undertake the obligation to repay the money the bank has lent you, plus pay interest according to the terms and schedule you have agreed upon with the bank.

The main characteristic of this loan is that the property is used as collateral if you fail to meet your obligations.

It's important to understand that the mortgaged property is, for all intents and purposes, yours, and you can sell it, rent it out, or even mortgage it again. There's a common misconception that the property belongs to the bank, but this is false.

First, you need to be clear about why you want a mortgage and know how much savings, income, and debt you have.

Once you have a clear idea of your situation, you can start in several ways:

On your own:
visit comparison websites, understand how the process works, go from bank to bank and provide documentation to each, receive and compare offers...

With Hipoo:
contact us, and a dedicated expert will guide you from start to finish, applying to multiple banks simultaneously, and helping you compare options and negotiate terms.

When a mortgage has a fixed rate, the interest will not change during the life of the mortgage. And the installment will also remain the same throughout the loan period. Therefore, it provides stability and avoids surprises.

If it's a variable rate, the interest may change throughout the life of the mortgage loan. The interest will be reviewed periodically on the date agreed in the contract, and the installment amount may go up or down depending on interest rate fluctuations. In Spain, it is common to use Euribor as the reference index for this type of loan.

If it's a mixed rate, it combines an initial fixed-rate phase with stable installments, followed by a variable phase where interest rates are adjusted periodically according to an index like Euribor. It offers initial security and the possibility of benefiting from interest rate drops, but it also carries the risk of higher installments in the variable phase if interest rates rise.

Lenders may request a large amount of documentation (depending on their risk criteria and, of course, your specific profile).

To speed things up, Hipoo recommends having the following documentation ready before choosing your winning mortgage:

‍General Documentation
- DNI or NIE (Provided by Hipoo to the bank)
- Income Tax Return (Provided by Hipoo to the bank)
- Earnest money contract (if signed)
- Deeds for each property you own
- Rental agreement if you live in a rented property, along with the latest rent receipts
- Updated employment history
- Recent bank statements
- Loan receipts (if applicable)

‍If you are an employed worker (employee of a company)
- Last three payslips (Provided by Hipoo to the bank)
- Employment contract
- Proof of additional income beyond salary (if any)

‍If you are self-employed
- Annual VAT declaration (Provided by Hipoo to the bank)
- Quarterly VAT payments for the current year
- Latest social security payment receipts

If you need to know how to obtain each of these documents, speak with your Hipoo advisor.

In parallel, we recommend proceeding with requesting the property registry extract and the appraisal.

A property registry extract is a document that informs you of the property's "legal" status.

Regardless of what the seller tells you, the property registry extract shows you the property's 'real' situation (as this document is registered in the Property Registry).

The document contains the following information:
- Description: property type, square meters, boundaries to the north, south, east, and west. Location:
- Specific address and locality
- Owners: Who the current owner or owners are
- Encumbrances: includes mortgages, easements, leases, etc.
- Various notices: e.g., liens and lawsuits, tax checks…
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There are several types of commissions:

- Arrangement fee: A mortgage may or may not have an arrangement fee. It depends on each offer. This fee is usually a percentage of the amount borrowed and is paid when the transaction is signed. It is a charge that covers the bank's costs for making the funds available to the client.
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- Loan modification: Loan modification involves renegotiating the loan with the same lender to change interest rate conditions, modify the term, or other elements such as amortization.

- Mortgage transfer (creditor change): (a type of loan modification): This is the amount the previous lender charges us for switching banks. It can range from 0% to 1%, depending on negotiation and your profile.Mortgage transfer (debtor change): involves taking over the mortgage from the individual (or developer) selling us the house.

- Early partial repayment: If you want to reduce the debt, you can partially repay your loan early. This repayment can affect the term (shortening it while maintaining the previous payment), the installment amount (reducing it while maintaining the original term), or both (reducing both the installment and the term).

- Early repayment in full: The borrower repays the entire loan before its maturity, paying the lender the outstanding principal and accrued interest up to that point, thereby ending the relationship between them.

- : A floor clause sets a minimum interest rate that will apply to the loan, even if the reference interest rate falls. Ceiling clauses set a maximum interest rate, even if the reference rate rises.

The important thing is to understand your specific situation and analyze whether it's beneficial to negotiate certain fees or not. Speak with your advisor.
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Typically, banks require you to have at least 30% of the property's value in savings. This covers at least 20% of the purchase price plus mortgage expenses (e.g., notary fees, registration fees, etc.).

To give you an idea, expenses usually amount to between 6% and 10% of the property's value. However, mortgages are highly customizable products, so sometimes, depending on the transaction, the lender, and your profile, banks may increase the amount they will lend you up to 90% of the property's value.

Expenses you need to cover:

- Property Registry Extract: €10 to €15, depending on the urgency and speed with which you need it.
- Appraisal: Costs between €250 and €600, depending on the property's value, and is valid for 3 months from the issue date.
- Tied products: You should not only consider the installment but also the cost of tied products.

Expenses covered by the bank:
- Stamp Duty (AJD): The cost depends on each autonomous community, ranging from 0.5% to 1.5% of the loan amount.
- Notary fees: Varies by notary, but to give you an idea, around €1,000.
- : Around €500.Management agency fees: Around €500.

Euribor is an index that sets the price at which European financial institutions are willing to lend money to each other. You can find detailed information about Euribor here.

Some banks offer the loan agreement along with the contracting of other products. Typically, they offer a combination that includes direct debit of salary, home insurance, and life insurance.

And although there are many more linked products, these three are the most interesting to financial institutions because:
- They ensure you are receiving a stable source of income to pay the installment (direct debit).
- They are securing the collateral/property if you fail to meet your obligations (home insurance).
- And, finally, they protect the payment in case something happens to one of the policyholders, which, although institutions prefer nothing to happen to you, is something they prefer to have covered (life insurance).

There can be a multitude of variables, but these "standard" linked products have the most impact when it comes to the institution offering attractive conditions.

However, one must be careful, because some institutions do not profit from the mortgage itself, but they do profit from the linked products. This is neither good nor bad; it is simply a strategy of the banks. Sometimes it can be more profitable to have these products contracted with the banks, and you can save a lot of money, but at other times it is not so evident, and even due to your profile, the operation, or because you have access to certain banks with very aggressive offers without linked products, it may make sense not to contract them.

Therefore, the most important thing is to check and compare the financing costs (APR), which include the costs of the linked products, and to make a comparison with an expert in the field to help you make the decision.

The APR, or Annual Percentage Rate, is an indicator expressed as a percentage that allows you to compare different mortgages, giving you a reference of the true cost of each one.

The APR indicates:
- Nominal Interest Rate (NIR): this is the percentage agreed with the bank as payment for the money lent.
- Mortgage fees and expenses: opening fee, notary fees, or registration fees...
- The frequency of payments.

The valuation is an objective assessment of the property you want to mortgage. It serves to give banks an idea of how much the house is worth and thus ensure that the value will be sufficient for them to recover the lent money in case of default (which is why, as a general rule, they only grant 80% of the lower of the two values between the valuation and the purchase price. This is a way to ensure they can sell it and cover the granted loan).

The official valuation for a mortgage is regulated by the Bank of Spain and must meet minimum requirements.

Banks are obliged to have an official valuation before formalizing any mortgage operation. And very importantly, they are obliged to accept any valuation provided by the client, as long as it is certified by an approved appraiser who complies with ECO/805/2003 regulations according to Law 1/2013 of May 14.

The great dilemma. And a very personal decision.

The first thing you should know is that whatever you do, you won't know if you made the right choice until a few years have passed. The second most important thing is that you should generally understand each option:

Variable Rate:
The interest rate changes over time based on the Euribor. That's why the payment varies every 6 months or a year (depending on what was agreed).
- Advantage: The initial payment is lower.
- Disadvantages: The payment is variable. You cannot know what will happen in the future or how much you will pay.

Fixed Rate:
The interest rate is always the same, so the loan payment is always the same too.
- Advantage: You can have peace of mind and plan for the future better.
- Disadvantage: It generally means paying more interest and amortizing capital at a slower pace.

Mixed Rate:
‍The interest rate consists of a fixed period (3, 5, or 10 years) and a variable period (remaining years). According to recent studies, it has been the most chosen mortgage among Spaniards in recent years.
- Advantage: You can have peace of mind during the initial fixed-rate years and benefit from future interest rate drops.
- Disadvantage: It has a variable component that could increase the interest rate.
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It's clear that the future is uncertain and that ultimately it's a very personal gamble. There are no right or wrong choices, because whatever happens, 50% of you will be luckier, and the other 50% won't be as lucky. So, how do I choose?

Well, at Hipoo we advise choosing a fixed rate if:
1) You prefer the peace of mind of knowing that the payment will not change. You think your income source is unlikely to increase (or will only increase slightly) during the mortgage period (e.g., a civil servant).
2) The mortgage is for more than 20 years and you don't plan to sell the property.
3) Also for those who don't like to gamble, bet, and take excessive risks (ultimately, it all depends on your personality).

And a variable rate if:
1) You think your income source should increase in the future.
2) It's a mortgage for 15 years or less, or perhaps you don't think the property will be for life, and there's a possibility you might sell it in the future.
3) You believe that banks have learned their lesson and we have mechanisms that would control indiscriminate rate hikes.

And a mixed rate if:
‍1) You like a middle ground between security and flexibility. You're not one to take big risks with a 100% variable rate, but you also don't want to be tied to a fixed rate forever. It's a balanced option!
2) It's a mortgage for 15 years or less, or perhaps you don't think the property will be for life, and there's a possibility you might sell it in the future. By benefiting from a fixed payment at the beginning, you avoid the uncertainty of the variable part if you don't plan to keep the mortgage for the entire term.
3) Ideal if you expect your income to increase in the future.

Choosing the type is important. Talk to your advisor whenever you want, so that together you can make the decision you feel most comfortable with. And we'll see what happens in the future.
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Direct debit of salary, home insurance, and life insurance are the most common linked products (perhaps we could occasionally include payment protection insurance).

Banks may be interested in you taking out these linked products for these reasons:
- They ensure you are receiving a stable source of income to pay the installment (direct debit).
- They are securing the collateral/property if you fail to meet your obligations (home insurance).
- And finally, they protect the payment in case something happens to one of the policyholders, which, although institutions prefer nothing to happen to you, is something they prefer to have covered (life insurance).

The reductions that can be achieved are around 1%-1.2%, so the reduction is substantial, but you must be attentive to the costs of the linked products and compare different APRs.

Furthermore, you should assess whether the interest rate reduction also holds true when we add up all the costs of the linked products, although logically, the value of having the property insured and the life insurance coverage for both policyholders must be taken into account (which we hope you never need, but it's good to know it's there).

With Hipoo, you can analyze with your advisor whether it makes more or less sense to take out the mortgage with linked products. A good Excel spreadsheet is highly recommended so that the decision is fully analytical.

‍Differences of up to 700 euros per year
For your reference, the amount a mortgage becomes more expensive if you take out linked products can be around 700 euros, and as we said, if these linked products are rejected, banks increase the interest rate by 1 to 1.2%. In practice, this means an annual payment of between 700 and 800 euros.
- So, as you can see, it pretty much evens out (although if you take out the products, at least you have that covered).
- But be very careful, because the key is to analyze the costs of the associated products and understand what the difference would be if we didn't take them out, in order to assess whether it makes sense to pay that small extra...

The real problem is that it's not easy to know whether or not to take out the linked products. Furthermore, there is scarce information about the linked products themselves, their price, and characteristics, which complicates the analysis task.

As always, you can speak with your advisor so that together you can analyze what makes sense given your particular circumstances.

The mortgage term is a very personal decision, and, frankly, the bank doesn't care much as long as you meet the financial requirements and have the capacity to repay the loan.

Let's analyze what is cheaper or safer, and ultimately help you figure out the best term for you.

The factors that determine our best term are two: . You should analyze several elements:
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1) Never accept a payment exceeding 35% of your income. On this point, you should consider that Euribor could rise and, theoretically, could reach pre-crisis levels, around 5%. (Although this is an unlikely prediction, the question is: could you cope if that happened and your payment exceeded 35% of your income?)
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2) Shortening the term is easier than extending it (as that would imply a mortgage novation, i.e., a change in conditions). Therefore, if you decide to adjust the terms, we recommend not cutting it too close and maintaining a high repayment capacity.
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3) The shorter the term, the less interest you pay and the better the interest rate conditions.

In other words, it all comes down to finding a balance between paying for the shortest possible time to minimize interest, and maintaining some flexibility (like a cushion for unforeseen events that may arise).

As a general rule, the more savings you have and the higher your income, the more sense it makes to reduce the mortgage term.

Conversely, if you're a bit tight and "use a large part of your savings for the down payment," it makes more sense to opt for long-term options, because if you have to do a novation (change of conditions), no one guarantees that the bank will accept the conditions, for example (or you might have to accept a much more expensive interest rate due to your penalty, etc.).

Although it may seem that the offers banks provide are "take it or leave it," there is certainly a possibility to negotiate the terms.

At Hipoo, we suggest starting with two personalized offers as a basis for initiating the negotiation process. By comparing the best aspects of each, you can get an idea of what the perfect mortgage tailored to you might look like.

To achieve a good negotiation, you should keep the following in mind:

1) Know what you're talking about. Although it may seem trivial, from experience we know that knowing what you're talking about greatly influences negotiations with the bank. You don't need to know industry jargon; just understanding the mortgage ecosystem is enough. It's important to understand that this "knowledge" cannot be delegated to Hipoo or any financial intermediary. You will need to make a small effort during this period to understand what is happening around you.

2) Compare thoroughly before speaking with the bank, and preferably, narrow your focus to 2 mortgages. This is because when you try to cover too much, things can get complicated. It's better to focus your efforts on the 2 pre-offers you liked the most.

3) Another element that will strengthen your negotiation position is your salary. If you have a salary of over €3,000, this could be the tenth of a percentage point that makes a difference. Your savings capacity also acts as effective leverage for negotiation. The higher the percentage, the greater your ability to improve conditions.

In short, you need to highlight your strengths and be able to explain your weaknesses before sitting down with the bank.

Once you are clear on whether your profile offers room for negotiation, you must choose what you want to negotiate, because you need to understand that negotiation capacity is limited. For example, when the bank sends you a personalized offer, we strongly advise against requesting improvements on all elements. Instead, focus on one or two elements and accept the rest. A good way to do this is to use other personalized offers as a reference for how far the bank might be willing to go.

These are some of the elements that may be open to negotiation:

- Interest rate. Especially if you have a strong financial profile (in relation to your salary, or if you could be a very good client for the bank); in this case, you could propose reducing the interest rate by about 0.2% for a variable-rate mortgage and up to 0.5% for a fixed-rate mortgage.

- Grace period: Negotiate the possibility of paying a reduced monthly installment for a certain period. This helps mitigate the risk of unemployment and being unable to meet mortgage payments, for example.

- Insurance premiums. The insurance premium (especially life insurance) can be reduced, for example, by reducing the coverage scope. The same applies to home insurance.

- Elimination or reduction of fees: In our experience, the opening fee is more difficult to negotiate than, for example, the early repayment fee.

Speak with your advisor so that together you can prepare a good negotiation strategy.