Loan Refinance Spain

Loan refinance in Spain involves restructuring existing debt to achieve better terms, lower interest rates, or reduced monthly payments. Borrowers typically pursue this through three main mechanisms: novation (changing terms with the current lender), subrogation (moving the debt to a new lender), or canceling an old loan to open a new one. The Spanish financial market offers refinancing options for mortgages, personal loans, and business credit lines.

Banks and financial institutions in Spain operate under strict regulations when approving a personal loan refinance in Spain or a mortgage modification. Lenders assess solvency using data from the Banco de España and credit bureaus like ASNEF. The process requires formal identification using a DNI or NIE and proof of stable income. Understanding the legal framework, specifically the Mortgage Credit Act (Ley 5/2019) and the Consumer Credit Act (Ley 16/2011), is essential for borrowers navigating this process.

Rates and Fees

Refinancing costs in Spain vary significantly depending on the type of debt and the method chosen. Mortgage refinancing is heavily regulated, with caps on cancellation fees. Personal loan refinancing is subject to different fee structures under consumer credit laws. The following table outlines typical rates and fees associated with refinancing in the current Spanish market.

Loan Type	Interest Rate (TIN)	APR (TAE)	Early Repayment Fee	Opening Fee	Processing Time
Mortgage Refinance (Fixed)	2.80% – 4.50%	3.10% – 4.90%	Max 2% (first 10 yrs)	0% – 1%	30 – 60 Days
Mortgage Refinance (Variable)	Euribor + 0.50% – 1.00%	3.50% – 5.50%	Max 0.25% (first 3 yrs)	0% – 1%	30 – 60 Days
Personal Loan Refinance	5.95% – 10.00%	6.50% – 12.00%	0.50% – 1.00%	0% – 2%	1 – 7 Days
Debt Consolidation (Secured)	3.50% – 6.00%	4.00% – 7.50%	Max 1%	1% – 3%	30 – 45 Days
Debt Consolidation (Unsecured)	8.00% – 14.00%	9.00% – 16.00%	0.50% – 1.00%	1% – 3%	3 – 10 Days

The Annual Percentage Rate (TAE – Tasa Anual Equivalente) includes the nominal interest rate (TIN) plus commissions and operational costs. For personal loans, the early repayment fee is capped by law at 1% of the repaid capital if more than one year remains on the term, or 0.5% if less than one year remains. Mortgage cancellation fees are strictly limited by the 2019 Mortgage Law, making it cheaper to switch lenders than in previous decades.

Additional costs may apply depending on the legal procedure. A novation (changing terms) usually incurs fewer taxes and fees than a subrogation or a new loan. However, if the refinancing involves a mortgage, borrowers must account for appraisal fees (tasación), notary fees, and land registry costs, although the bank often covers the AJD tax (Impuesto de Actos Jurídicos Documentados) for mortgages.

Mechanisms of Refinancing in Spain

Spanish banking law recognizes three distinct methods for altering debt obligations. Each method carries different legal requirements and cost implications.

Novation (Novación)

Novation involves renegotiating the terms of a loan with the existing financial institution. This is often the most cost-effective method as it avoids the cancellation of the original contract. Borrowers request a novation to lower the interest rate, extend the repayment term, or remove specific clauses. The bank is not legally obliged to accept a novation request. If accepted, the changes are formalized, often requiring a public deed before a notary if the original loan was a mortgage.

Subrogation (Subrogación)

Subrogation refers to moving an existing loan to a new bank to secure better conditions. This is common in the mortgage sector. The new bank pays off the debt to the original bank and assumes the creditor position. The original bank has the right to make a counter-offer (enervación) to match the new conditions. If they match the offer, the borrower must stay; if not, the borrower moves to the new entity. Subrogation allows borrowers to change the interest rate or term but does not typically allow for increasing the capital borrowed.

New Loan Contract

The third option involves taking out a completely new loan to pay off the old one. This allows for total flexibility, including changing the loan amount, the term, and the co-signers. However, this is the most expensive option. It triggers cancellation fees for the old loan and opening fees for the new one. For mortgages, it requires a full cancellation in the Land Registry and the constitution of a new mortgage deed, incurring higher notary and registry fees.

Mortgage Refinancing Regulations

Refinancing a mortgage is a primary way for Spanish homeowners to manage rising interest rates. The process is governed by the Ley 5/2019, regulating real estate credit contracts. This law increased transparency and consumer protection.

Switching from Variable to Fixed Rates

Many borrowers in Spain refinance to switch from a variable rate linked to the Euribor to a fixed interest rate. This provides stability in monthly payments. Under current regulations, banks often offer incentives or reduced fees for this specific type of conversion to encourage stability in the housing market. The fee for converting from variable to fixed is strictly capped by law, often at 0.15% or even 0% during specific promotional periods mandated by government decrees.

The FEIN and Fiper Documents

When initiating a mortgage refinance in Spain, the bank must provide the Ficha Europea de Información Normalizada (FEIN). This document is a binding offer that details the interest rate, total cost, and conditions. It must be provided at least 10 days before signing. The borrower must also receive the Ficha de Advertencias Estandarizadas (FiAE), which highlights risks such as interest rate fluctuations. These documents ensure the borrower fully understands the financial commitment before visiting the notary.

Personal Loan Refinancing

Refinancing consumer credit differs from mortgage refinancing. Personal loans are unsecured debts, meaning they are not backed by property. Consequently, interest rates are higher, and banks perceive a higher risk.

Assessment Criteria for Personal Loans

When applying to refinance a personal loan, lenders conduct a thorough risk analysis. They review the borrower’s employment history, requiring an indefinite contract (contrato indefinido) for maximum approval chances. Temporary contracts are viewed as high risk. The bank calculates the debt-to-income ratio, ensuring that the new monthly payment does not exceed 35% to 40% of the borrower’s net monthly income.

Consumer Credit Act Protections

The Ley 16/2011 regulates consumer credit contracts. This law ensures that borrowers have the right to repay their debt early at any time. It also mandates that all fees and the TAE must be clearly disclosed in the contract. If a borrower refinances to combine multiple small loans into one personal loan in Spain, the new lender must adhere to these transparency rules. The law also protects borrowers from abusive clauses regarding late payment fees.

Debt Consolidation (Reunificación de Deudas)

Debt consolidation is a specific form of refinancing where multiple debts—such as credit cards, car loans, and personal loans—are combined into a single loan. This reduces the number of monthly payments to one and often extends the repayment term to lower the monthly outlay.

Secured vs. Unsecured Consolidation

There are two main types of consolidation. Unsecured consolidation involves taking a larger personal loan to pay off smaller debts. This is faster but comes with higher interest rates. Secured consolidation involves adding the debts to a mortgage. This results in a much lower interest rate (mortgage rates are lower than consumer rates) but puts the property at risk. If the borrower defaults, the bank can foreclose on the home.

The Process of Consolidation

To consolidate debt in Spain, specialized agencies or banks analyze the total outstanding debt. They negotiate the early settlement of existing loans. The borrower then signs a new contract. This process often involves significant administrative costs, including the fees of the agency (intermediary), cancellation fees for all previous loans, and setup costs for the new loan.

The Role of CIRBE in Refinancing

The Central de Información de Riesgos del Banco de España (CIRBE) is a critical database in the Spanish financial system. It is not a blacklist but a database recording all financial risks held by banks.

Reporting Thresholds

Banks are required to report any cumulative risk (loans, credits, guarantees) a borrower has with them if it exceeds €1,000. When a borrower applies for refinancing, the new bank consults CIRBE to see the applicant’s total indebtedness across the entire Spanish banking system. This ensures the bank has an accurate picture of the borrower’s solvency.

Impact on Approval

If CIRBE shows a high level of existing debt relative to income, the refinancing application may be rejected. Furthermore, CIRBE records “indirect risk,” such as being a guarantor (avalista) for someone else’s loan. Being a guarantor reduces a borrower’s capacity to refinance their own debts, as banks consider the guaranteed amount as a potential liability.

ASNEF and Negative Credit Files

ASNEF (Asociación Nacional de Establecimientos Financieros de Crédito) is the largest delinquency file in Spain. Being listed in ASNEF severely impacts the ability to refinance.

Consequences of Listing

Traditional banks in Spain generally do not approve refinancing for individuals listed in ASNEF, regardless of their income. The automated risk systems reject applications immediately upon detecting a record. Debts in ASNEF can range from unpaid loan installments to disputed utility bills.

Refinancing with ASNEF

Borrowers in ASNEF seeking refinancing often must turn to private equity lenders (capital privado). These lenders operate outside the traditional banking circuit and usually require property collateral. The interest rates for these loans are significantly higher than market averages, often exceeding 10% or 12%. These are considered bridge loans designed to clear the ASNEF debt so the borrower can eventually return to traditional banking.

Documentation and Requirements

Successful refinancing requires a comprehensive dossier of documents. Spanish banks are bureaucratic and require physical or certified digital copies of all financial records.

Identification and Status

Borrowers must provide a valid DNI (for citizens) or NIE and TIE (for residents). Non-EU citizens may face stricter scrutiny regarding the validity of their residency permits. The bank also requires the latest tax returns (Declaración de la Renta – Modelo 100) to verify annual income and tax compliance.

Proof of Income and Solvency

Employees must submit their last 3 to 6 payslips (nóminas) and their employment history report (Vida Laboral), which proves the length of employment and contract type. Self-employed individuals (autónomos) must provide quarterly VAT returns (Modelo 303) and income tax payments (Modelo 130) to demonstrate business stability.

Property Documents

For mortgage refinancing, the bank requires a Nota Simple from the Land Registry (Registro de la Propiedad). This document proves ownership and reveals existing charges or liens on the property. A recent appraisal (tasación) by a Banco de España-approved valuer is also mandatory to establish the current Loan-to-Value (LTV) ratio.

Car Loan Refinancing Nuances

Refinancing a vehicle loan involves specific legal constraints due to the nature of the collateral.

Reserva de Dominio

Most car loans in Spain include a “Reserva de Dominio” (Domain Reservation) clause. This means the lender retains legal ownership of the vehicle until the debt is fully paid. A borrower cannot sell or transfer the car while this clause is active. To refinance a car loan in Spain with a different lender, the new lender must pay off the old loan to lift the domain reservation at the Traffic Registry (DGT) before registering the new charge.

Depreciation Factors

Banks assess the current value of the car against the outstanding loan balance. Since cars depreciate rapidly, refinancing is only viable if the car’s value exceeds the loan amount. Lenders rarely refinance “upside-down” car loans where the debt is higher than the vehicle’s market value.

Business Loan Refinancing

Companies in Spain often refinance to improve cash flow or invest in expansion. This involves restructuring credit lines (pólizas de crédito) or long-term investment loans.

ICO Loans and Public Backing

During economic crises, the Instituto de Crédito Oficial (ICO) provides guarantees for business loans. Refinancing an ICO-backed loan requires adherence to specific government decrees regarding grace periods and extension of maturities. Banks cannot unilaterally alter the conditions of the public guarantee without adhering to these regulations.

Pool Bancario

When a business seeks to refinance a business loan in Spain, banks request the “Pool Bancario.” This is a detailed report of all the company’s banking relationships and debts. It allows the refinancing bank to understand the company’s leverage and how the refinanced debt fits into the overall capital structure.

Tax Implications of Refinancing

Refinancing triggers specific tax obligations in Spain. Understanding these costs is vital for calculating the net benefit of the operation.

AJD (Stamp Duty)

The Impuesto de Actos Jurídicos Documentados (AJD) applies to notarial deeds that are registrable in the Land Registry. Since 2018, the law requires banks to pay the AJD for mortgage loans. However, if a borrower refinances by taking a personal loan or through a private contract that is not notarized, AJD does not apply.

Income Tax Deductions

For mortgages taken out before January 1, 2013, for a primary residence, borrowers can deduct a percentage of their payments from their income tax (IRPF). When refinancing, it is crucial to ensure that the new loan maintains the link to the primary residence acquisition to preserve this tax benefit. Novation generally preserves the right, while canceling and opening a new loan might complicate the deduction if not handled correctly.

The Role of the Notary and Registry

The Spanish notary system ensures the legality of loan contracts. A notary is a public official who attests to the identity of the parties and the understanding of the contract terms.

Mandatory Visits

For mortgage refinancing, the borrower must visit the notary twice. The first visit is for a consultation (acta de transparencia) where the notary explains the conditions and verifies the FEIN without the bank present. The second visit is for the actual signing of the deed. This double-visit system is mandatory to prevent miss-selling of complex financial products.

Land Registry Inscription

After signing, the deed must be inscribed in the Registro de la Propiedad. This gives the mortgage legal effect against third parties. The “Gestoría” (administrative agency) usually handles the payment of taxes and the registration process on behalf of the bank, but the borrower pays for these administrative services as part of the closing costs (provisión de fondos).

Online Lenders vs. Traditional Banks

The landscape of refinancing in Spain includes traditional banks and online fintech lenders. Each offers distinct advantages and processes.

Traditional Banks

Entities like Santander, BBVA, and Caixabank hold the majority of loan assets. They offer the most competitive rates for customers with high loyalty (direct deposit of salary, insurance products). However, their approval processes are slower, and their criteria are stricter regarding CIRBE and employment stability.

Online Lenders and Neobanks

Online platforms offer faster processing times and more flexible criteria for smaller amounts. They utilize algorithms to assess risk quickly, often bypassing the need for physical paperwork by using bank account aggregation tools (reading transactional data directly). While convenient, their interest rates for refinancing unsecured debt are typically higher than traditional banks. They are regulated by the Banco de España and must comply with the same consumer protection laws.

Consumer Rights and Complaints

Borrowers in Spain have specific rights if they believe a bank has acted unfairly during the refinancing process.

Claims Process

If a bank fails to provide the required FEIN or charges fees exceeding legal limits, the borrower should first file a complaint with the bank’s Customer Service Department (Servicio de Atención al Cliente). If the issue is not resolved within one month (or 15 days for payment services), the borrower can escalate the claim to the Banco de España.

Banco de España Supervision

The Banco de España supervises the conduct of entities but its resolutions in individual complaints are not binding on the bank. However, a favorable report from the Banco de España is strong evidence if the borrower decides to take the matter to court. Consumer protection authorities (Consumo) in each autonomous community also accept complaints regarding abusive clauses or lack of transparency in advertising.