When you buy a property of any type, obtaining a mortgage is always an option to be taken into consideration. However, there are some specific terms and technical vocabulary that you should be aware of before you apply for a mortgage. In Pollentia Properties we provide information on the TAE, corresponding to the English term: annual percentage rate of charge (APR), which you will no doubt have heard mentioned. This is vital information for anybody contemplating buying a property in Mallorca.
What exactly does the TAE consist of? It is a complex financial element included by all banks following instructions issued by the Bank of Spain in 1990.This index is a percentage of the real cost of a financial operation including interest rates and other amounts to be paid by the client for using the services of the bank. This could be, for example, fees setting up the mortgage, cancellation of the same or a line of credit.
However, the TAE does not include all expenses which could correspond to taxes, notary fees or bank transfer fees, depending on the financial operation required. Even so, the TAE is a reliable index to guide you when obtaining your mortgage.
So, the higher the TAE percentage offered by your bank for your mortgage, the higher the expenses you will have to pay. Therefore, you must study the TAE very carefully when the bank informs you about the conditions of your mortgage and it is sometimes more important than even the interest rate. Remember: the TAE comprises the majority of the costs involved in your loan.
Let us look at one example. Imagine that you are interested in taking out a mortgage to buy a property in Mallorca and two different banks make you an offer. The first bank offers you the Euribor interest rate + 1% and 4.50% TAE whilst the second bank offers you the Euribor rate +1,50% and a TAE of 4%. The first offer is apparently the best one since the interest rate is lower. However, here is the catch! You will save more with the bank which offers you a lower TAE. Remember, the TAE is a method of comparison between different products because it indicates the total cost involved.
Therefore, once you get your head around this matter, you will be in a position to compare the different mortgages offered by the different Banks and to choose the most suitable one for you. And then you will be able to buy a property in Mallorca from those featured in the extensive catalogue offered by Pollentia Properties.
If you wish to look further into everything involved in calculating the cost of a mortgage, we recommend you to take a look at our article on all you ought to know about the Euribor when buying a property in Mallorca.