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Here is a Glossary with a few concepts related to your Loan. The idea is to explain certain terms or technical concepts so you may interpret them correctly.

AER (ANNUAL EQUIVALENT RATE): The interest rate that indicates the cost or effective performance of a financial product. The AER is calculated in accordance with a standard mathematical formula which takes into account the nominal interest rate on the transaction, the payment frequency (monthly, quarterly...), any bank commissions as well as any transaction expenses. In the case of credit, some concepts are not included when calculating the effective cost such as any expenses the customer may avoid by using the powers granted in the contract, expenses that must be paid to third parties or expenses for insurance or guarantees (except in cases of a special rate and when the institution requires them in order to grant the credit).

Arrangement fee: : A commission paid to compensate for the administrative and processing expenses involved with arranging and granting a loan. It is usually paid in one lump sum and the amount is often related to a percentage of the borrowed capital.

Auction: The public sale of assets to the highest bidder regulated by a mandate and with the participation of a judge or other competent authority.

Bare Ownership: An ownership right granting the holder the right to alienate a possessed thing but does not grant the use or enjoyment (right to derive a profit) which are subject to the usufruct of said thing.

Binding Offer: A document with all of the data included in the Personalised Key Fact Sheet which is issued once a customer and a financial institution have shown an interest in contracting a certain mortgage loan banking service, the valuation is available and the proper verifications have been made concerning the registry status of the property and the customer's financial solvency. The document must specify that it is a binding offer in addition to the validity period of the offer which may not be less than fourteen calendar days from the date of delivery.

Book date: The date on which a certain transaction is made and is entered into the books by the corresponding banking institution.

Borrower: : A person who receives money on loan with the obligation to return it along with interest within the agreed term.

Burden: : An encumbrance or limitation on the ownership of a property.

Burden-free: : Property that is free of all burdens is property that appears in the Land Registry records as not subject to any type of limitation of ownership. In order to establish the status of burdens on a particular property, a Property Registry Filing must be requested from the Spanish Land Registry.

Cadastral Value or declared value: The value unilaterally established by the government comprised of the value of the land (urban development circumstances affecting it are considered) and the value of the structure (considering the building conditions, situation, use, age and quality). It is not a fixed value and may vary over time.

Capitalised interest: It consists of the interest established in an agreement which is due and unpaid that is added to the principal sum pending payment; such amount generates further interest.

Certificate of Title: A document that proves ownership of an asset. For property, these certificates of title are often documented in a public instrument that includes all of the circumstances of the transfer and allows for registration with the Land Registry.

Certifying public officer: A notary or other public servant who may issue attestations.

CIRBE: The Bank of Spain Risk Information Centre is a public service that maintains a database comprised of all loans, credits, guarantees and risks in general between financial institutions and their customers.

Co-borrower: The co-holder of a loan.

Commissions: The fixed or variable compensation institutions may receive for the provision of services.

Contract: An agreement with specific terms that may create or transfer rights and obligations for the signing parties.

Credit: A financial transaction that grants a sum of money with the debtor promising to repay in addition to an amount of interest for the use of said sum. It differs from a loan in that the debtor of a credit has a certain sum available and only pays interest on the amount used (the full amount is received in a loan).

Creditor: The person or institution with the right to receive payment for a debt.

Damage Insurance: Insurance aimed at indemnifying an insured party for damages that may be caused to a property under certain circumstances.

Data Protection Act: A Spanish law that establishes the obligation for all public and private people, companies and organisations holding personal data to comply with a series of requirements and apply certain security measures in order to ensure the personal and family honour and intimacy of all citizens by preventing access to information through data processing that affects privacy and other fundamental rights.

Dation in payment: An act by which a debtor gives something to the creditor that differs in character from the original debt which the creditor agrees to accept for discharge in lieu of the latter. In mortgage situations, the mortgaged property is delivered in order to obtain the full or partial discharge of the debt.

Debt consolidation: A mortgage loan that is granted following an application by a customer with various debts in effect (personal loans, credit cards...) to cancel all of them so as to, normally, take advantage of better conditions offered by mortgage loans versus other types of loans. By extending the repayment term and lowering the immediate sum of the instalment, the customer may overcome a transitory difficult situation.

Debt restructuring plan: A contract between a lender and a borrower by which new conditions are agreed for the fulfilment of the debtor's obligations.

Deed: A public document signed by the granting parties that is attested by an authorising notary. It offers the greatest of legal security and may be registered with the Registry.

Delay: A failure to comply with an obligation, normally to pay a liquid and payable sum, before the due date.

Delay Interest: The additional interest that applies when a debtor breaches a payment obligation. The purpose is to repay the damage caused by the debtor to the creditor due to the delay in the fulfilment of a payment obligation.

Deposit: When purchasing property, this is the sum of the sales price that comes from the buyer's own funds without considering any possible financing obtained.

Differential: The margin added to the value agreed as a reference upon interest rate revisions (Euribor, IRPH...) in a mortgage loan signed with a variable or mixed rate.

Disbursements: A disbursement loan is one where partial amounts are paid out at different times during the life of a loan (normally conditioned on the progress of new buildings and construction work).

Draft: The rough copy of a contract (a deed of trust, for example) which is revised and then issued with all of the formalities necessary for perfection.

Early Payoff: The complete repayment of a loan prior to the scheduled termination date.

Early Repayment: A sum returned prior to the date initially established in a loan agreement. Early repayments may be partial or total.

Early Repayment Charge: It is payable if you pay all of the loan amount whereby the loan is cancelled or if the property is transferred and the new buyer does not subrogate into the mortgage.

Encumbrance: AA burden or limitation on property, irrespective of the owner. Subject to registration with the Land Registry.

Entry: Each written record made for an estate with the Land Registry.

Estate: TFixed property comprised of a delimited portion of land. Assets registered with the Land Registry are assigned a number known as the "registered estate".

Euribor: An official reference rate. The interest rate at which credit institutions offer to lend funds in euros to each other. The European Banking Federation publishes this rate daily for 15 maturity terms ranging from one week to one year. It is calculated as the averaged interest rates offered daily by a panel of 50 of the most active credit institutions in the inter-bank market. The one-year Euribor is the most common official reference rate used for mortgage loans in Spain.

FIPER (PERSONALISED KEY FACT SHEET): A document provided by credit institutions to a customer once the customer has provided the required information relating to their financing needs, financial situation and preferences which outlines the personalised information necessary in response to an application for credit. This document allows the customer to compare the loans available on the market, weigh the implications and make an informed decision on whether or not to sign a contract. A Personalised Key Fact Sheet must be issued free of cost well enough in advanced and always before the customer becomes bound by any type of contract or offer.

FIPRE (MORTGAGE KEY FACTS SHEET): A document credit institutions must provide customers who request it containing clear and sufficient information on the loans they offer. This information must be free of cost and is considered informational only. It shall be available to customers through all sales channels used by the institution.

Financing: The allocation of financial resources to defray the costs of an activity. In home buying, the financing usually ranges between 70 and 80% of the market value of the property purchased.

Fixed Rate Loan: A loan agreement where the interest rate for the life of the loan is fixed from the time it is formalised without any variation possible.

Foreclosure: Enforcement proceedings ordering the sale of a property which was subject to a mortgage due to a breach by the debtor of the obligations guaranteed with the mortgage. The purpose of these proceedings is to recover the value of the property in a transparent manner in order to pay the breached debt.

Forgiveness: An act by which a person, who is the creditor of another, decides to waive their rights so as to release the debtor of the payment obligation.

Guarantee: A guarantee that consists of an obligation assumed by the guarantor to comply or pay if the primary debtor does not.

Guarantor: The party to a loan that undertakes to comply or pay if the primary debtor does not. This party's liability includes all of their present and future assets.

Instalment: Each one of the periodic payments agreed to repay a loan.

Interest: The rent paid on the use of a third party's money for a certain period of time.

Interest-only period (or combined): The period during which the borrower will only pay interest without paying off any of the outstanding debt; therefore, the sum of the principal remains the same throughout such a period.

Interest rate floor clause: A clause added to loan agreements by some institutions which establishes a minimum interest rate to be paid irrespective of any variable interest rate agreed where said minimum shall apply even if the value of the reference rate goes lower than the minimum established at any time.

Interest Revision Frequency: The frequency at which the interest rate is revised (normally quarterly or annually) for variable interest loans.

IRPH (Spanish Mortgage Reference Rate): An official reference rate. The percentage used by financial institutions to update interest rates on mortgages with a variable interest rate. Every month, the Bank of Spain publishes all rates by averaging the different rates offered in the mortgage market by banks and savings banks.

Land Registry: The government registry which registers or records all documents, contracts and court or administrative resolutions affecting the ownership or other rights to property.

Legal/administrative processing agency: A firm that is dedicated to filing and completing all procedures before public entities on behalf of private individuals or companies. In the case of home buying and mortgage loans, these agencies handle all of the procedures until the transaction is registered with the Land Registry.

Lender: A private individual or legal entity that delivers a sum of money to be returned within a certain period of time in exchange for the receipt of interest.

Life Insurance:Personal insurance that covers the risk of the insured party's death as a means to ensure the financial security of the people who may financially depend on said person.

Loan Repayment Insurance:Insurance where the insurance company assumes the payment of the sum pending repayment owed by the insured party-borrower if any of the contingencies provided for in the insurance policy occur (death or disability, as applicable) before the debt is fully paid off.

Margin: The differential that is added to the value of an index agreed as the reference when revising interest rates (Euribor, IRPH...) on mortgage loans contracted at variable or mixed rates.

Maturity:The point in time when the term stipulated by two or more parties comes to an end and, therefore, the parties involved must fulfil their contractual obligations.

Mixed Rate Loan:A loan agreement which differentiates a first period, usually the first few years of the life of the loan, when the interest rate is fixed and a second period after that when the interest rate is established using a reference rate plus a margin to then work as a variable rate loan.

Mortgage: An in rem right over tangible assets (normally fixed assets) subjecting said assets to the fulfilment of a monetary obligation. Such rights are granted in a public document and the rights are constituted upon registration with the Land Registry. Besides payment of the principal, a mortgage guarantees the collection of ordinary and default interest as well as the costs and expenses deriving from a possible court claim in the event of non-payment.

Mortgage Calculator:A computing tool which uses variables such as the loan amount, interest rate, term and instalment sum to provide various scenarios and examples with hypothetical interest rate increases or term decreases so users may make informed decisions when taking out a loan.

Mortgage debtor: The person who receives a sum of money with an obligation to repay it along with the agreed interest within a fixed amount of time.

Mortgage Liability: The maximum amount the property will be used to recover in the event of a foreclosure due to a failure to pay the loan it secures. The sum includes the principal of the loan, the ordinary interest, any delay interest as well as the foreclosure costs and expenses. The formalisation and cancellation expenses of a mortgage are calculated based on this amount.

Mortgage Loan: A bank product that enables a person, as a customer or borrower, to receive a certain sum of money (known as the loan principal) from a credit institution (the lender) in exchange for a commitment to return said sum along with the corresponding interest in periodic payments (known as instalments). With these types of loans, the credit institution has a special surety that it will be reimbursed for the sum lent: a mortgage on a property (usually a home) which is often owned by the customer.
All loans are secured in general with all of the debtor's present and future assets. But in the case of mortgage loans, the credit institution may sell the mortgaged property if the debtor does not pay the debt in order to recover the sum pending payment.

Mortgagor: A party who acts in a mortgage loan transaction, encumbering property said party owns with a mortgage lien right as a guarantee for the fulfilment of the obligation undertaken by the mortgaged debtor.

Municipal Building Permit: The authorisation or permission required to engage in any construction work which is granted following verification of the compliance of the permit application to the provisions of urban development regulations.

Municipal Capital Gains Tax (Plusvalía, as it is known in Spanish): A local tax on profits based on the increase in value of urban land made at the time the property is transferred by any title. The liable taxpayer is the acquiring party in the case of a transfer free of charge (example: donation) and the transferring party in the case of a transfer for payment (example: purchase and sale).

Nominal Interest Rate or Annual Percentage Rate (APR): The Interest Rate is the percentage applied to the pending principal on a loan in order to calculate the interest to be paid. When the expected period of time used for the calculation and settlement of interest coincides with the means of expression used for the interest rate, the nominal interest rate is being used.
Example: 4% annual, the interest to be paid/received each year for a transaction involving a principal of 1,000 euros with annual calculation and settlement of interest would be 40 euros.

Non-borrowing mortgagor: When the mortgagor is not also a mortgage debtor and will only be liable for the mortgaged asset without any personal liability.

Notary: A public servant with the powers to attest to contracts (purchase and sale and mortgage agreements, among others), testaments and other out-of-court legal documents, as per the law.

Novation: An agreement between the parties to a contract to modify a part of the content thereof. It is used, for example, to modify the conditions of a mortgage loan by modifying the interest rate and, where applicable, the term or other elements of the loan. A novation may involve the collection of a commission as agreed in the loan contract.

Official Reference Rates: Interest rates used as a reference in variable interest rate transactions. The calculation is done by the Bank of Spain and the rates are published monthly in the Official Spanish Gazette as well as many media outlets. The most commonly used official reference rate today is the one-year Euro Interbank reference rate (Euribor).

Payment Holiday: During a payment holiday, the borrower does not pay interest or any capital meaning the sum of the principal will increase due to the interest generated during such a period.

Pending Balance: The sum a debtor continues to owe on loan before full repayment is made.

Personal Loan: A bank product that enables a person, as a customer or borrower, to receive a certain sum of money (known as the loan principal) from a credit institution (the lender) in exchange for a commitment to return said sum along with the corresponding interest in periodic payments (known as instalments). They are known as personal because the institution does not usually have any special surety in this type of loan to guarantee the reimbursement of the sum lent. They are secured in general with all of the debtor's present and future assets.

Premium: In insurance, this is the payment (periodic or flat fee) that must be made to the insurance company in order to cover the risks outlined in a policy.

Principal: The capital of a loan as the sum of money lent by the creditor to the mortgage debtor.

Private Document: A document that outlines the will of the parties without the participation of a notary public or competent authority, meaning they are not registered with the Land Registry.

Property manager's certificate: A document issued by the property manager certifying whether the owner of a home has any debt with the Owners' Association.

Property Registry Filing: A document issued by the Land Registry which is for informational purposes only and reports the valid registration entries for a specific property, identifies it, identifies the holders of the registered rights to it, as well as their extension, nature and limits. Moreover, it indicates any prohibitions or restrictions affecting the holders or rights registered.

Property Tax (IBI, as it is known in Spanish): A local tax on the value of property where the taxable event is constituted by the ownership of said property.

Property Transfer Tax (ITP, as it is known in Spanish): The type of tax on all paid transfers of all types of assets comprising a person's estate which are not taxed by Value Added Tax. These include the purchase and sale of second-hand property and later transfers.

Proxy: A person who has the power to represent another and act in the other person's name.

Public Document: A document issued or authorised by a competent authority or notary public which attests to the content meaning it may be registered with the Land Registry.

Refinancing: The substitution of one loan with another in order to modify the financial conditions, extend the repayment period or increase the capital.

Registration: The written recording of a property with the Land Registry. Registration includes the aperture of a folio and the assignment of a property registry number to the property.

Registry certificate: A document certifying the ownership and/or any encumbrances or burdens in effect on the property. Contrary to a "Property Registry Filing", its value is not purely informational as it certifies the Registry content.

Registry discharge: A written record made with the Land Registry to eliminate an encumbrance on property. It is possible that such encumbrance is no longer subject to any economic sum yet it continues to be on record with the Registry until the entry is discharged.

Registry Entry: All written records or notations in registry books or documents. Entries and written records are classified as: entries for submission, registration, preventive notations, discharges and margin notes.

Registry Verification: The verification of registry data on a property. Verification may be done by reviewing the registry books, through a property registry filing (informational purposes only) or certification (attests to the content on file with the Registry).

Reimbursement: A sum returned by the debtor prior to the due dates agreed in a contract. Reimbursement may be partial or full and may be associated with a commission fee.

Repayment: The partial or total return (cancellation) of a debt.

Repayment System: Methods under which a loan may be paid back, the choice of which will affect the amount and composition of the periodic instalments to be paid by the borrower. The most commonly used system in Spain is called the French amortization system where the sum of the instalments (sum of the portion of the amortized principal plus interest that corresponds to the period) remains constant throughout the life of the loan although a lower proportion of interest is paid with each instalment given that the principal pending amortization decreases with each instalment paid (in other words, more interest is paid in the beginning than in following years). This system may be used with a fixed or variable rate.

Retainer: A sum delivered to a third party with an order to make certain payments, the exact final amount of which is unknown beforehand. This quantity is settled against invoices justifying the payments actually made.

Revision: The updating of the interest rate for variable interest loans at the points in time and at the frequency established in the loan agreement. It will depend on the value of the agreed reference rate at the time of updating (in addition to the margin or differential).

Stamp Duty Tax (AJD, as it is known in Spanish): The type of tax on certain notarised, commercial or administrative documents signed in Spanish territory or which are effective in Spain. These include mortgage loans and deeds of purchase and sale for property for first transfers.

Subrogation: The substitution of one person with another in the exercise of a right or the fulfilment of an obligation. A subrogation in mortgage loans may affect either the creditor or debtor depending on whether the substitution involves the credit institution or the debtor.

Subrogation fee for a change in debtor: A commission applied in cases where an already-mortgaged property is acquired and the buyer of the property decides to keep the mortgage loan already on the property bought and the institution agrees.

Substitute reference rate: A reference rate provided for in a loan agreement for cases where the initially planned reference rate for the interest rate calculation on variable or mixed rate loans is no longer officially published.

Surety: A sum of money or an asset that is delivered as a guarantee for the fulfilment of an obligation. In the case of personal surety (guarantor), it refers to the person who assumes another's payment obligation, undertaking to fulfil it if the contracting party does not.

Taxable event: A legal or economic event which leads to the rise of a taxation obligation.

Termination: The end of a contract because it has been performed or because it is voided by agreement between the parties.

Undivided Property: An asset which is jointly owned by two or more people whereby the owners only possess an aliquot portion of the whole.

Usufruct: The real right to use or enjoy (derive profit from) a thing possessed. The separation of ownership rights where the holder is granted use and enjoyment of a thing possessed but not the right to alienate it which pertains to the bare owner. The death of a usufructuary extinguishes said right.

Valuation: A report issued to establish the market value of a property in relation to the offer and demand at a particular time. Valuations completed for mortgage purposes are legally effective meaning they are subject to compliance with certain standards and must be prepared by officially authorised valuation firms which are supervised by the Bank of Spain. They are completed by analysing the technical and legal aspects of a home that could affect the value.

Value Added Tax (VAT): An indirect tax on consumption which devolves upon the delivery of goods and the provision of services by businesses or professionals for payment as part of their activities. In real estate, VAT devolves upon the first transfer of property (second or later transfers are taxed by Property Transfer Tax). In the Canary Islands, this tax is substituted with IGIC (Canary Island General Indirect Tax).

Value date: The date on which a sum begins to generate interest or is payable, for example when it is deposited into a current account.

Variable Rate Loan: A loan agreement where the interest rate is established as per a reference rate (which rises and drops with the market) plus a margin or differential. As the reference rate evolves, the definitive interest rate for each period is determined as per the value of the reference rates at the time of previously established revision periods.



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