If you're buying property in Spain and are planning to take out a Spanish mortgage, whether you're from Spain or not, then you may have heard "Euribor" mentioned a lot by Spanish banks. But what is Euribor and how will it affect you if you take out a Spanish mortgage? We have all the details.
What is Euribor?
The concept of Euribor has become a very widely used term in Spanish banks and can sound a little daunting, especially if Euribor isn't commonly used or doesn't exist in your country of origin. Euribor is the acronym for the Euro Interbank Offered Rate and basically refers to the interest rate at which credit institutions lend money to each other. This rate set by the European Central Bank (ECB) and is updated daily.
What is Euribor used for?
Euribor does not simply refer to a single interest rate, but actually an average of the rates at which European banks lend money to each other over a particular period. Therefore, there are actually 8 different Euribor values for each of the defined Euribor terms or maturities: 1-week, 2-week, 1-month, 2-month, 3-month, 6-month, 9-month, and 12-month Euribor rates. Although this may sound a little complicated, if you are thinking of taking out a mortgage in Spain, then it is the 12-month Euribor rate is the one you need to worry about, as it is the most commonly used as a benchmark for mortgages in Spain. In simple terms, the 12-month Euribor is the interest rate that is usually used to calculate your monthly mortgage payments in Spain.
How does the Euribor affect mortgage payments?
Mortgages in Spain generally have fixed, variable or mixed (a combination of fixed and variable) interest rates. Mortgages with a variable interest rate are most affected by the Euribor and if the Euribor rises, this in turn will push up your monthly mortgage payments, or vice-versa. Most Spanish mortgages that have variable interest rates are calculated as a pre-established percentage plus Euribor where the percentage is generally between between 0.75% and 2%. Euribor rates are currently negative and experiencing historic lows, meaning that now could be a great time to take advantage and buy property in Spain.
- For more information and guidance about mortgages in Spain, both for residents and non-residents, check out idealista/hipotecas and find the best mortgage for your needs.
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