Early repayment of a mortgage involves paying off part (or all) of the borrowed amount before the agreed term ends. If you choose to make a partial repayment, you have two options: shorten the term of the mortgage (so it is paid off in fewer years), or reduce the monthly payment (keeping the original term). Reducing the term also reduces the total interest paid over time, making it the most cost-effective option. However, if you prefer to lower your monthly instalment, you’ll benefit from increased liquidity each month.
It’s important to note that financial institutions are legally allowed to charge a fee for early repayment, although some banks offer this option without any cost—so it’s crucial to check this detail when taking out a mortgage. The maximum fees allowed under Spain’s Law on Real Estate Credit Contracts (Ley reguladora de los Contratos de Crédito Inmobiliario – LCCI) are as follows:
For variable-rateFixed, variable, and mixed-rate mortgages are the three main types of mortgage available in Spain, and they differ based on how interest is calculated in each case. Fixed-rate mortgages apply a single... More mortgages:
- First 5 years: up to 0.15% of the repaid amount
- From year 6 onwards: 0% (no fee)
- For fixed-rateFixed, variable, and mixed-rate mortgages are the three main types of mortgage available in Spain, and they differ based on how interest is calculated in each case. Fixed-rate mortgages apply a single... More mortgages:
- First 10 years: up to 2%
- After 10 years: up to 1.5%
If you fully repay your mortgage in Spain, it’s essential to follow certain steps to officially cancel the debt and remove any charges from the Land RegistryThe Catastro is a public registry that records all real estate properties in Spain (homes, commercial premises, plots, etc.). It contains detailed information about each property, including the cadast... More (Registro de la Propiedad):
- Request a mortgage cancellation certificate from your bank or lender
- Sign the deedThe escritura de propiedad or Title Deed is a legal document that transfers ownership of a property from the seller to the buyer. It confirms who the legal owner is and under what conditions the... More of cancellation before a notary
- Submit the deedThe escritura de propiedad or Title Deed is a legal document that transfers ownership of a property from the seller to the buyer. It confirms who the legal owner is and under what conditions the... More to the tax office (Hacienda – Form 600)
- Register the cancellation with the Land RegistryThe Catastro is a public registry that records all real estate properties in Spain (homes, commercial premises, plots, etc.). It contains detailed information about each property, including the cadast... More
If you skip these steps, your property will still appear as mortgaged in the Land RegistryThe Catastro is a public registry that records all real estate properties in Spain (homes, commercial premises, plots, etc.). It contains detailed information about each property, including the cadast... More, which could cause issues when trying to sell or pass it on as inheritance.
