In an economic context marked by rising interest rates and inflation, many families in Spain are looking for alternatives to obtain liquidity without having to sell their real estate assets. One of the most commonly used options is refinancing a home, a financial solution that allows homeowners to take advantage of the equity built up in their property.
In this article, you will find a guide explaining what home refinancing is, how it works, when it is advisable to do so, the necessary requirements, and the alternatives available on the market this year.
Refinancing a home involves applying for a new mortgage on a property that already has a previous mortgage but has built up equity or has been partially paid off. This allows the owner to obtain additional financing without having to sell the property.
Unlike a mortgage extension, refinancing involves canceling the existing mortgage and replacing it with a new one, which generally has different terms, such as the repayment period, interest rate, or loan amount.
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You may be able to obtain up to 80% of the appraised value of the property (depending on the bank), allowing you to finance various projects such as renovations, investments, or debt consolidation.
If interest rates have dropped since you took out your first mortgage, you may be able to secure a lower-cost loan.
Unlike a personal loan, the money obtained from a home equity loan has no restrictions on its use, so you can use it for education, entrepreneurship, purchasing another property, etc.
Mortgages typically have terms of 20 to 30 years, which reduces the monthly payment compared to a short-term loan.
Refinancing a home is a financial process that involves replacing an existing mortgage with a new one, generally to obtain additional capital or improve the loan terms.
First, the property must be appraised. An independent appraiser (or one appointed by the bank) assesses the current market value of the home. The cost of the appraisal ranges from €300 to €600, depending on the location and size of the property.
Then, an application and feasibility study are carried out, in which the bank analyzes your financial profile (income, current debts, credit history) and determines the percentage of financing, which is normally up to 80% of the appraised value.
The previous mortgage is canceled and paid off with the new loan. Some banks charge an early repayment fee (between 0.5% and 2% of the outstanding balance).
The new deed is then signed before a notary, which is mandatory to formalize the new mortgage, registered in the Property Registry (a process that takes between 1 and 2 weeks), and finally, the funds are disbursed when the bank releases them, which can be used freely.
At Domoblock, we invite you to read our articles on: fixed, variable, or mixed mortgages.
Refinancing involves canceling the original mortgage and taking out a new one with different terms. It allows you to negotiate longer repayment periods, lower interest rates (if the market favors it), or higher loan amounts. Its costs are higher due to notary, registry, and appraisal fees, but it is the ideal option if you are looking to significantly change the terms of your loan.
On the other hand, extending a mortgage consists of increasing the amount borrowed under the same conditions as the current mortgage. It does not require canceling the previous mortgage, making the process quicker and more affordable. However, there are limitations, as the bank may refuse the extension if the financial situation has worsened. It is more advisable for specific needs involving smaller amounts.
For projects over €50,000, refinancing is usually more affordable than a personal loan, as it typically offers lower interest rates.
If your home has increased in value (for example, purchased for €200,000 and now worth €300,000), you can access more capital.
If interest rates have fallen since you took out your first mortgage, you may be able to reduce your monthly payment.
Personal documentation is required, such as your ID, pay stubs from the last 3 months, and your income tax return.
For the property, you will need information about the current mortgage, such as outstanding payments and terms, the official appraisal of the home, and a debt certificate to verify that there are no liens.
You must determine how much money you need and for what purpose, and calculate whether you can afford a higher monthly payment.
It is recommended to request simulations from at least three institutions (BBVA, Santander, CaixaBank, digital banks), comparing interest rates (fixed, variable, or mixed), fees (opening, early repayment), and the maximum term, which is usually 30 years.
The bank will send an appraiser to assess the value of your home. If the value has increased, you will be able to access more funds.
Pay stubs from the last 3 months, income tax returns, copies of the current mortgage, and a debt certificate from the Property Registry are required.
The cost usually ranges between €1,000 and €2,500, depending on the loan amount. This is when the previous mortgage is paid off and the new one is signed.
The bank will deposit the funds into your account within 15 to 30 days.
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Associated costs include: appraisal (€300 to €600); notary and Property Registry fees (€1,000 to €2,500 depending on the loan amount); origination fee (0.5% to 2% of the loan amount, for example, 1% of €200,000 is €2,000); administrative fees (€300 to €800); and early repayment fee (if applicable), 0.5% to 2% of the outstanding balance.
The estimated total usually ranges between €2,000 and €5,000, depending on the bank and the value of the property.
The total debt increases and the repayment term is extended, possibly up to 30 additional years.
Expenses such as mandatory home insurance or floor clauses can make the loan more expensive.
If the mortgage is not paid, the bank may initiate foreclosure proceedings.
If you choose a variable rate, a rise in the Euribor will increase your payments.
You can use online comparison tools such as Kelisto or HelpMyCash and negotiate with banks.
A fixed rate offers greater security (for example, 2.75%), while a variable rate involves a risk or benefit depending on the Euribor.
Your payment should not exceed 35% of your monthly income.
It is necessary to avoid abusive terms, such as hidden fees and early repayment penalties.
Consult a mortgage advisor
Useful for small amounts (up to €50,000), but with higher interest rates.
Allows you to receive a monthly income without selling your home.
If you need liquidity and don’t want to take on more debt.
Up to 80% of the appraised value.
There is no legal limit, but each bank will assess your creditworthiness.
Yes, and it is usually easier when you have no outstanding debt.
BBVA, Santander, CaixaBank, and EVO stand out for their competitive rates.
It depends on the bank, but they usually require a good credit history.
It depends on the amount needed. For amounts over €50,000, refinancing is usually more affordable.
Between 3 and 6 weeks, depending on the bank’s processing time.
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Refinancing a home can be an excellent way to access liquidity, but it requires a careful assessment of the associated costs and risks. Compare different offers, evaluate your repayment capacity, and consult with a financial advisor before making a decision.
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