Refinancing a Spanish mortgage: how to determine if it is worthwhile
You already have a Spanish mortgage and are wondering if there is a smarter way. A logical question, especially if you signed up for a variable rate that fluctuates with the Euribor at the time. Refinancing your Spanish mortgage can lower your monthly payments or fix the interest rate, but it does not pay off in every situation. At Spaanse Hypotheek, Patrick Kruger guides Dutch and Belgian clients through exactly this decision-making process. In this article, you will read what refinancing in Spain entails, when it is worthwhile, what it costs, and how the process works.
Table of contents
- What does refinancing your Spanish mortgage mean?
- Why would you refinance in Spain?
- Novation of subrogation: blijven of overstappen?
- When does refinancing really pay off?
- What costs are involved?
- How does refinancing work in practice?
- What should you pay attention to as a non-resident?
- Frequently Asked Questions
What does refinancing your Spanish mortgage mean?
Refinancing means improving the terms of your current Spanish mortgage. In Spain, this can be done in two ways. If you stay with your own bank and renegotiate the terms, this is called a novación. If you switch to another bank, this is called a subrogación. The goal is the same in both cases: a lower interest rate, a fixed rate instead of a variable one, or other terms that suit you better. The route differs, but the savings you are seeking do not. If you first want to know how interest rates in Spain are structured, please also read our article on mortgage interest rates in Spain.
Why would you refinance in Spain?
The main reason to refinance is the interest rate. Spanish mortgages often have interest rates that fluctuate with the Euribor. If the Euribor is high, you pay more than necessary every month. By refinancing, you fix the interest rate or switch to a bank with better terms, so that your monthly payments decrease or become predictable. In addition, there are practical reasons. Perhaps you want to adjust your term, change the type of mortgage, or remove a co-owner from the deed. That also falls under refinancing. In short: you refinance because your situation or the market has changed since you signed, and your terms no longer align with it.
Novation of subrogation: blijven of overstappen?
With a novación, you return to your current bank and ask for better terms. This could be a lower interest rate, but also a longer term, a higher amount, or a different type of mortgage. If your bank cooperates, the change is recorded, depending on the adjustment, via a notary. If your bank is unwilling to budge, subrogación comes into play. You then look for another bank with a better offer. That new bank takes over your mortgage, the old deed lapses, and a new deed with new terms is drawn up. Which route works best depends on what your current bank offers and what another bank puts in relation to your profile. Comparing banks in Spain is the starting point for this.
When does refinancing really pay off?
Refinancing does not automatically save you money. You lower your monthly payments, but you also incur costs to arrange the switch. The question, therefore, is whether the savings outweigh those costs in the long run. Two factors carry the most weight. The first is the difference between your current interest rate and what you can get elsewhere: the larger that gap, the sooner it pays off. The second is your remaining term: if you still have many years to go, a lower interest rate has plenty of time to pay for itself. If you are nearing the end of your term, the gain is often too small to justify the effort. Therefore, always calculate it thoroughly before making a decision. Our mortgage calculation gives you a first impression, and in a consultation, we compare the figures to your specific situation.
What costs are involved?
Switching banks is not free. Expect a new valuation of your home, notary fees, registration in the land registry, and a gestoría to handle the administration. Sometimes your current bank also charges fees for early adjustment or termination of your existing mortgage. Offsetting these costs is a benefit: with subrogación, a new bank takes over your existing mortgage, meaning you do not pay the full tax burden of a brand-new mortgage. That makes a difference. The exact amounts and tax implications vary by region and situation, so it is best to discuss these with your advisor or tax specialist. It is important that you have a clear picture of all costs before you sign, so that you know the true savings and do not just see the lower monthly payments.
How does refinancing work in practice?
A subrogación begins like a regular application. The new bank assesses your financial situation and has your property revalued. If approved, the bank issues an offer, which is submitted to your current bank via a notary. Your old bank then has the opportunity to make a counter-proposal and retain you. If no suitable counter-offer is received, the transfer is formalized at the notary, and your mortgage continues with the new bank. A novación with your own bank is faster, as it does not involve a second bank or a transfer of ownership. In both cases, expect a processing time of a few weeks to a few months, depending on the bank and the valuation. The entire process resembles taking out a mortgage, so the steps in our overview of mortgages in Spain largely apply here as well.
What should you pay attention to as a non-resident?
As a non-resident, a Spanish bank scrutinizes your application more closely than for a local client, even when refinancing. Your income, current obligations, and the value of your home determine whether you can switch and under what conditions. You will need your documents again, ranging from proof of income to your NIE number, and communication takes place partly in Spanish. This often makes the difference between a smooth transition and a stalled process a matter of good preparation and guidance. Therefore, have a calculation done beforehand to determine whether refinancing will truly be beneficial in your case, before investing time and money in an application.
Frequently Asked Questions
What is the difference between novación and subrogación?
With a novación, you adjust the terms and conditions at your current bank. With a subrogación, you switch to another bank, which takes over your mortgage. The first route keeps you with the same lender, while the second provides you with a new deed and new terms and conditions.
Does refinancing always save money?
No. You lower your monthly payments, but you incur costs for valuation, notary, and registration. Whether it pays off depends on the interest rate difference and your remaining term. Always calculate it before you decide.
Does my home need to be revalued?
Usually, yes. The new bank wants to know the current value of your home before taking over your mortgage. You pay for that valuation yourself, and it is a factor in your decision-making.
Can I borrow extra when refinancing?
Sometimes. Especially with a new mortgage at your own bank, you can adjust the amount or term in addition to the interest rate. Whether this is possible depends on your profile and the bank. Have this included in your application.
Can I refinance my Spanish mortgage with a Dutch bank?
As a rule, a property in Spain is financed by a Spanish bank, so refinancing typically involves moving from one Spanish bank to another. It is best to discuss what is possible in your situation during a personal consultation.
