5 things you should know before signing a mortgage
It is normal that when someone is going to sign a mortgage, or is looking for one, certain questions arise. I want to clarify for anyone in this situation the aspects that I believe everyone should know and take into account before signing a mortgage, focusing on mortgages granted to consumers or individuals. That is why I want to share with you this and another subsequent post about the basic aspects of mortgages, starting with the first five most important mortgage issues.
Frequently asked questions to know before applying for a mortgage
1- The first question before signing a mortgage: How much can the bank finance me when I buy my home?
If you are going to buy a property, you need to know that banks usually finance up to a maximum of 80% of the appraisal value. In this case, it is important to differentiate between the appraisal value and the purchase price. The first, the appraisal value, is the value that an official appraisal entity, after examining the characteristics of the property, its condition, etc., considers it to be worth. The purchase price, on the other hand, is the price one pays to acquire the property. Generally, both values tend to be similar, so the bank's financing usually approaches the sale price, but the appraisal may be higher, in which case you can obtain a higher percentage relative to the sale price, which is an advantage.
However, there is no legal financing limit, although 80% of the appraisal value is the general rule. There may be cases where the mortgage covers 90%, 95%, or even 100%. This will depend on the bank granting the mortgage loan and on the client's profile, their creditworthiness, and any additional guarantees presented, such as if the mortgage is accompanied by guarantors or co-signers.
What to look for when taking out a mortgage? Understanding interest rates, terms, discounts and fees before signing a mortgage agreement
2- Fixed-rate, variable or mixed mortgage?
Choosing the type of interest before signing a mortgage is important. That is why, below, we explain the different types of interest that exist and their advantages.
Fixed-rate mortgage. In this type of mortgage, the interest to be paid during the life of the loan remains stable, without any variation. This type of mortgage does not take into account the Euribor or any other reference rate, so it will not be affected by their increases. In this type of mortgage, the debtor knows the instalment they will pay month by month from the beginning, which offers peace of mind to the debtor and greater capacity for financial planning.
As a disadvantage, having a fixed rate for a long time, at least initially, can be more expensive than variable rate mortgages, although in the long term, due to fluctuations in the Euribor, they can represent a saving. Furthermore, in these times of inflation, the fixed-rate mortgage offers considerable savings, as I explained in a previous post on this blog to which you can access below:
Variable rate mortgage. Variable rate mortgages are those whose final interest rate results from adding the interest rate agreed with the bank to the Euribor. Due to variations in the Euribor, the total interest rate also varies, as does the payment instalment, which is reviewed every 6 or 12 months.
This type of mortgage offers short-term savings compared to fixed rate mortgages. They are recommended for people with greater financial capacity, who can pay off the mortgage in the short term, or for those willing to take risks.
Mixed mortgage. This type of mortgage combines a fixed interest period with a variable one.
3- What mortgage concepts should I know?
APR. The Nominal Interest Rate (APR) is the percentage that the bank applies to the outstanding capital, that is, what the bank will charge you for lending you the money. In this way, the monthly interest is calculated, which will be reflected in the instalment, and the APR can be fixed or variable.
EAR. The Equivalent Annual Rate (EAR) is the interest rate that indicates the effective cost or yield of a financial product, in this case the mortgage. This calculation takes into account the APR, the repayment term, costs, commissions, etc. It is used to compare different financial products, although it should not be the only parameter considered when comparing mortgages. In the case of fixed interest loans, it will be the real cost of the operation.
Default interest. This is the interest rate applied as a penalty for late payment of an instalment. This interest applies to the unpaid instalment(s), not to the total outstanding capital.
Euribor. It is the reference index that takes into account the average interest rate at which European banking entities lend money to each other. Variable mortgages are usually referenced to this index, to which a percentage is added for the calculation of the total interest, so if it fluctuates, the instalment will be affected.
Instalment. The instalment is the amount of money that must be paid periodically to the bank until the total debt amount is repaid. It consists of part of the capital lent to you and the interest agreed with the bank. As mentioned, if the interest rate is variable, this instalment will vary according to changes in the reference index.
Mortgagor debtor. This is the person who applies for a loan from the bank, undertakes to repay the borrowed money, and guarantees this repayment with a property they own.
Mortgagor non-debtor. This is the person who, having neither borrowed money from the bank nor owing anything, allows the repayment of another’s loan to be guaranteed by putting their own house or another property they own as mortgage collateral.
Guarantor or surety. In this case, the person neither owes anything to the bank nor mortgages any of their assets, but guarantees with their own personal assets that if the debtor does not pay, they will.
Additionally, we leave you below this article about the code of good banking practices:
4- Mortgage with or without bonus
Discounts are reductions in the agreed interest rate that the bank offers for contracting certain products with them. It is common for many banks to offer you an initial interest rate, which can be reduced if certain services are contracted.
The most common discount is having the salary, pension, or self-employed quota in the bank itself, with a minimum monthly income. Often, although it is not a discount as such, the rest of the discounts depend on this direct debit. Other discounts that are usually offered are for contracting home insurance or life insurance, for the periodic use of a credit card, for having income above a certain amount, or even for having the home alarm contracted.
It is important to know what discounts the bank offers you and their amount, as they can imply considerable savings by reducing the interest rate, although sometimes that saving is paid in commissions derived from banking services. Furthermore, there are mortgages where the delay in the payment of any instalment automatically and temporarily implies the loss of the aforementioned discounts.
It is also important to know that these discounts depend on the will of the debtor who receives the loan, and at any time, if they are not beneficial, they can dispense with the services that grant these discounts, with the consequent increase in the interest rate.
5- What types of commissions are there?
The most common fees in mortgage loans are the following:
Opening fee. It is paid when signing the mortgage loan for the administrative procedures carried out by the entity, such as creditworthiness verification, risk assessment, etc. It is most common that currently it does not exceed 1%.
Early repayment fee. It can be understood as a penalty for paying early, because such payment will result in a reduction in the total interest paid to the bank, that is, less profit. It usually varies between 0% and 2%, and will depend on the period in which the repayment is made or if it is total or partial (as you can read below). Currently, this fee must be related to the financial loss, and will only be paid if the financial institution suffers it.
Fee for debtor subrogation. It accrues in the case where a third party takes the position of the debtor, that is, in sales with subrogation. For example, if a house is acquired whose seller had a mortgage and the buyer keeps the house and also the mortgage. In this case, the acquirer will pay the fee on the outstanding capital.
Fee for change of creditor. If the entity changes, the original bank could charge a certain percentage of the outstanding amount. It is something like compensation for the loss of a client.
Novation fee. It is a fee for modifying any of the mortgage loan modifications (if the capital, interest rate, etc. is modified). It can reach up to 2% of the outstanding capital, although if only the repayment term is modified this fee cannot exceed 0.10%. You can consult our mortgage novation service in Barcelona.
Account maintenance fee. In some mortgages, this fee can be found. It is a fee, the amount in euros varies in each entity, charged for having the account open at the bank, although later the bank usually waives it, but it may appear in the mortgage deed.
Fee for claiming debtor positions. It is a fee that varies between €25 and €49, and that the bank charges each time it has to initiate procedures to claim from the client the non-payment of any instalment.
Other questions related to what to know before applying for a mortgage
Approximately a period of between 15 to 20 days occurs from the last procedure related to the appraisal to the moment of signing the mortgage. If you want to know how long it takes to sign a mortgage, we recommend this article:
After the mortgage deed is signed before a Notary, the bank proceeds to transfer the money to the seller almost immediately.
The options they focus on are income, savings, employment status or age to approve the mortgage loan.
Once you have decided on your property and have agreed the purchase with the seller, the deposit contract is signed after checking the administrative status of the property. In the deposit contract, a deposit of between 5 and 15% of the total value is usually paid.
To apply for a loan before signing a mortgage, it is common to go to several financial institutions to request comparisons and study which mortgage and with which bank is more advantageous for you. Currently, they usually grant 80% of the appraisal value.
After the agreement with the seller and after checking the administrative status of the property and signing the earnest money contract, it is usual to find the bank that offers you financing according to your interests. After that, the signing of the mortgage before a Notary takes place. We recommend this reading, where each of these actions is detailed:
According to the latest data from May 2025, the INE places the average interest rate on mortgage loans for housing at 3.11%, with fixed-rate mortgages at 3.29% and variable-rate mortgages at 2.94%.
This is a decision that each person must make in relation to the total cost of the loan. Generally, mortgages with bonuses have a lower interest rate, reduced monthly payments, and greater flexibility. Although they increase the commitment to the bank by having several products with it, you should assess that there are no fees or associated costs nor risks of penalties. If you are not affected by the latter and do not intend to change banks in the short term because you value stability, it is an option to consider.
How to pay off the mortgage early?
Banks offer repayment options and mortgage cancellation. To process them, you must contact the bank to notify the payment, indicate the date of the deposit, and make the payment.
For more information about signing a mortgage, you can complement this reading with the following post:
I hope this article about 5 things you should know before signing a mortgage provides knowledge and value to those of you who are thinking about taking out and signing a mortgage loan. From JLA Notarios, notary office in Barcelona, we are at your disposal for any doubts or questions related to the processing of mortgages in Barcelona in general or the signing of mortgages before a Notary. Do not hesitate to write to us at bcn@jlanotarios.com if you need a Notary for mortgages!
