Did you know that in the Valencian Community alone, around 35,000 mortgages were granted this year, so far? Well, it’s true! Whether they were for primary residences or holiday homes, that’s a lot of people in a position to qualify for a Spanish mortgage.
Now, most people pay their mortgage on time every month, until they decide to sell the property and upsize, downsize or relocate somewhere else, at which time the outstanding balance of the mortgage, would be paid back to the bank. Usually, there is a penalty to pay the mortgage off early. This is something that you and the bank would have agreed upon, at the signing of the application. In my experience, this penalty can vary, however, is more often than not, around 1%* of the outstanding balance. For example, if you owe €100,000, then a 1% penalty to pay the mortgage back early, would be €1,000.
When paying off a mortgage, due to the home being sold, the bank will send out a representative to appear at the Notary on the day of completion. They will collect the cheque for the outstanding amount of the loan, and sign the mortgage off as, paid in full. This will then get sent to be registered in the Land Registry, confirming that you have paid the loan back.
So what happens if you pay the mortgage off and you’re not ready to sell your property? Most people think that they just pay it back, and that’s the end of that. Well, until it has been cleared in the Land Registry, it will still show that the property has a registered debt against it. It is very common that the banks do nothing about clearing the mortgage in the Land Registry until you instruct them to do so. So if you are in the position of having paid your mortgage off early, you need to make sure this is cleared in the Land Registry too. Speak to your bank and tell them you would like this debt cleared in the Land Registry. You can easily ask your Lawyer or Fiscal Representative to obtain a Land Registry search, to make sure your home is legally registered as debt-free.
My advice - whether you’re paying off your mortgage due to the property being sold, or paying it back before you’re ready to sell, check with the bank first, regarding fees and paperwork.
*As with any legal costs regarding mortgages, you should always check directly with the bank.