Mortgages with Included Costs: Your Rights as a Consumer
One of the most requested services from our mortgage attorney in Seville is advice regarding the various options available for mortgage loans.
Currently, banks and savings institutions market a wide variety of mortgage products, and it is necessary to know and analyze them in detail to decide which is most suitable for us. One of the mortgage loans we can access is the so-called mortgage with costs included.
What is a mortgage with included costs?
During the real estate boom era, banks and savings institutions launched all types of mortgage products to attract thousands of future buyers seeking a mortgage loan. One of the most marketed products was the mortgage with included costs.
This is a type of mortgage loan that offers the total amount of the property to be acquired, that is, 100% of its value and, in addition, the costs inherent to the real estate transaction could be added: registry costs, management fees, etc. Even in some cases, the loan could include an additional amount for other types of expenses, related to home renovation, furniture, etc.
After the real estate bubble burst, this type of mortgage loan disappeared from the offering of bank mortgage products. Among other things, the real estate bubble has meant that both banks and individuals are now much more cautious regarding mortgage applications.
But this apparent disappearance of 100% mortgages plus costs does not mean that the product no longer exists. In certain cases, the bank or savings institution may approve a mortgage loan with these characteristics.
How to get a 100% mortgage plus included costs?
To obtain a mortgage loan for the total purchase value of the property plus costs, it is necessary that we request it from our bank and begin a negotiation on the conditions. This is a type of mortgage that, due to its characteristics, is not granted to all applicants, so we must meet a series of specific requirements.
We must also keep in mind that this type of mortgage plus costs will have a series of characteristics, which are usually longer amortization periods, that is, the period we will have to pay the loan will extend to 35 or 40 years. This means that monthly payments will be reduced by extending the years to repay the loan.
On the contrary, let us keep in mind that this will mean we end up paying more interest. It is also very common for this type of mortgage loan to be reserved only for those properties that are owned by the bank. In this way, the bank favors the purchase of its own assets.
The advantage of this would be that we would very likely save the cost of the appraisal, already carried out by the bank. As a general rule, it is easy to assume that since this is a riskier loan than a regular mortgage, the bank will ask for a series of additional guarantees: Solvency: applicants for this type of loan must demonstrate that they have sufficient solvency to be able to face loan payments.
This means that it will be verified if there is great job stability, if income is rather high. In case we do not offer sufficient guarantees regarding our solvency, it is possible that the bank will request an additional guarantee from us. These guarantees are usually either having other properties or having a guarantor willing to answer for us.
No debts: to be considered as a person with sufficient solvency, it will also be taken into account that we have no debts or that we are not included in delinquency files, such as ASNEF. Relationship with the bank: granting this type of mortgage is usually associated with the applicant contracting several additional banking products, such as home insurance, life insurance, etc.
Bank-owned property: in almost all cases, granting this type of 100% loan plus costs is subject to purchasing a property whose ownership belongs to the bank. These are some of the requirements that the bank may demand from us to consider our application for a 100% mortgage.
Let us keep in mind that these requirements can vary significantly from one institution to another and that we may also encounter additional conditions, so our suggestion, as specialist mortgage attorneys, is that you make the application at different banks and savings institutions to be able to compare the conditions of each one.
We must keep in mind in any case that, even meeting this type of requirement, the bank may deny us the granting of this type of mortgage since it is an extremely rigorous type of loan and therefore granted on very few occasions. It is possible that we will be offered an intermediate mortgage, in which the loan does cover 100% of the property value, but not the costs.
In this situation, we will have to have saved the amount corresponding to the real estate transaction and mortgage constitution costs.
Advantages and disadvantages of 100% mortgages plus costs
Any banking product must be analyzed to know all the characteristics and implications of its contracting. All of them can provide us with a series of advantages and disadvantages that we must analyze in detail before making a decision. Of course, it is more than advisable, almost mandatory, to request information from different institutions about the same product, to be able to choose the most convenient one.
As advantages we can highlight:
It is not necessary to have significant savings to carry out the purchase of the property. On many occasions, we will save the appraisal cost, which can reach up to 400 euros, since this type of mortgage is usually granted for the purchase of a property owned by the banking entity.
The amortization period is longer, potentially reaching 40 or even 50 years. This will mean that the monthly loan amount will be lower, leaving us with more available money each month. VAT savings: most properties owned by banking entities are usually second-hand homes.
This means we will not have to face VAT, but rather the Property Transfer Tax (ITP), whose amount is lower. 100% mortgages plus expenses are not exempt from disadvantages, which we should also take into account. The debt burden with this type of mortgage is greater since we will pay more interest.
The requested amount is 100%, to which we must add the expenses. This increases the loan amount and therefore the interest we will pay for it in the long run. Tie-in products: the products that the banking entity will require us to contract as a condition for granting the loan will be several.
These are products that are sometimes more expensive than other similar products from other companies, for example, insurance. Little variety: since most of these mortgages are only granted when we acquire an apartment from the bank or savings bank, we will have less variety to choose from regarding properties.
Additionally, their prices are sometimes somewhat higher compared to average prices by area and characteristics marketed by private individuals. Getting a 100% mortgage plus expenses is possible, although quite complicated. In any case, if you are seeking the granting of a mortgage loan, we recommend contacting our mortgage attorney in Seville who will offer you specialized advice about the best options.
Frequently asked questions about 100% mortgages with expenses included
Yes, although it is more difficult than before the real estate crisis. Currently, some banks continue to grant 100% mortgages plus expenses, especially for the purchase of properties that are owned by the banking entity itself. There are also financing lines with ICO guarantees for young people under 35 years old that can facilitate access to this type of mortgage.
However, solvency and tie-in requirements are usually stricter than in a conventional mortgage.
A mortgage with expenses included can cover, in addition to 100% of the property value, the following concepts: notary expenses, Property Registry expenses, management expenses, the Legal Documentation Tax (AJD), and in some cases, renovation or furniture expenses.
It is important to analyze each banking offer in detail, as the expenses included in the mortgage vary significantly from one entity to another.
Currently, there is no fixed list of banks that grant 100% mortgages. The granting depends on the applicant’s profile, the property, and each entity’s commercial policy at each moment. The entities that usually offer 100% financing are those that have a portfolio of their own properties they wish to sell.
We recommend consulting with a mortgage attorney who can advise you on the best available options and negotiate the conditions on your behalf.
Yes, that is precisely the main advantage of a 100% mortgage: it allows acquiring a home without needing to have prior savings for the down payment. However, you must keep in mind that if the mortgage does not include the purchase expenses, you will need to have approximately 10-12% of the property value available to cover taxes, notary, registry and management fees.
Only a 100% mortgage plus expenses would allow you to buy without any initial outlay.
The main risks of a 100 percent mortgage plus expenses are: greater total debt burden (you will pay more interest in the long term), longer amortization periods (up to 40-50 years), obligation to contract tie-in products with the bank (insurance, pension plans), and the risk of being in a negative equity situation if the property value drops.
It is essential to have specialized legal advice before signing. English Espanol
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