Investment approach
Early mortgage repayment in Spain: fee caps and how to work it out
Ley 5/2019 caps the early repayment fee: 0.15–0.25% on a variable rate and 1.5–2% on a fixed rate. How to work out the benefit, what to choose on a partial repayment and what to ask the bank.
Early repayment of a mortgage in Spain is the borrower's right to pay back all of the debt or part of it ahead of schedule, and the bank cannot refuse. On loans signed after 16 June 2019 the fee is capped by law: for a variable rate, no more than 0.15% in the first five years or 0.25% in the first three; for a fixed rate, 2% in the first ten years and 1.5% after that (art. 23 of Ley 5/2019 reguladora de los contratos de crédito inmobiliario, the real estate credit contracts law).
What the law lets the bank charge
The bank may charge compensation only in two cases that the law names expressly, and no more than its actual financial loss. Any other fee for early repayment is prohibited (art. 23.4).
| Loan type | Period | Fee cap on the amount repaid |
|---|---|---|
| Variable rate, option 1 | First 5 years | 0.15% |
| Variable rate, option 2 | First 3 years | 0.25% |
| Variable rate | After that period | 0% |
| Fixed rate | First 10 years or from the start date of the fixed period | 2% |
| Fixed rate | Rest of the term | 1.5% |
| Switch from variable to fixed (novación or subrogación) | First 3 years | 0.05%, then 0% |
On a variable rate the bank picks one of the two options in the contract; they cannot be combined. The percentage in the table is a ceiling: if the bank's loss is smaller, the fee is smaller too. The loss is calculated by the formula in art. 23.8, as the difference between the outstanding balance and the market value of the loan up to the next rate review. Novación is an amendment of the loan contract; subrogación is the transfer of the loan to another bank.
For variable-rate loans a temporary waiver of these fees applied, introduced in 2022; it ended on 31 December 2024 (DA 1 of RDL 19/2022 as amended by RDL 8/2023). The caps in the table apply again now.
What deadlines and documents the borrower is entitled to
The law gives the borrower three procedural rights worth remembering before calling the bank.
- Notice period. The contract may require advance notice to the bank, but no more than one month (art. 23.1).
- Calculation of the consequences. After the request, the bank must hand over within three working days, on paper or another durable medium, a calculation of what the repayment will cost and on what assumptions (art. 23.2).
- Insurance. Insurance tied to the loan under which the bank is the beneficiary ends with early repayment, unless the borrower asks to keep it and names a new beneficiary, and the unused part of the premium is refunded (art. 23.3).
Different rules apply to loans from before 16 June 2019. Ley 5/2019 does not apply to them, except in the case of a later novación or subrogación (first transitional provision). For home mortgages formalised since 9 December 2007, Banco de España cites the limits of Ley 41/2007: compensation for desistimiento (withdrawal from the contract) of no more than 0.5% in the first five years and 0.25% after that (Banco de España, Cliente Bancario).
How to work out whether repaying pays off
The fee is almost always smaller than the interest saved, but the decision depends on what else the money could do. Three figures are counted: the fee, the interest that will no longer have to be paid, and the alternative return or the liquidity cushion.
Worked example, not a forecast. Outstanding balance 300,000 €; the borrower repays 50,000 € in the third year of the loan.
| Scenario | Fee cap | Fee, at most |
|---|---|---|
| Variable rate, 0.25% for 3 years option | 0.25% of 50,000 € | 125 € |
| Variable rate, 0.15% for 5 years option | 0.15% of 50,000 € | 75 € |
| Fixed rate, first 10 years | 2% of 50,000 € | 1,000 € |
Even 1,000 € is an upper limit: the bank has to show the calculation of its loss. Banco de España explains the logic this way: the bank's loss usually arises when market rates at the time of repayment are below the rate on the loan. Your own payment schedule before and after repayment is easy to run in the calculator.
What to choose on a partial repayment: term or payment
On a partial repayment the contract determines what is reduced: the monthly payment or the loan term (Banco de España). Shortening the term at the same rate usually saves more interest; lowering the payment frees the monthly budget.
The order of action before repaying:
- Find the early repayment clause (reembolso anticipado) in the contract: which fee option applies and from what date the period is counted.
- Check that the period in which a fee is allowed at all has not ended.
- Submit a written request and get the bank's calculation within three working days.
- Decide what to shorten, term or payment, and record the choice in the request.
- After full repayment, deal separately with removing the charge from the land registry: a repaid debt does not delete the entry automatically, and the procedure is described in the article on cancelación registral (cancelling the mortgage entry).
When early repayment does not suit
It does not suit if after it the borrower has no reserve left for renovation, taxes and unexpected costs. Putting the money back into the loan without the bank's fresh approval is not possible.
It also works poorly for an investor whose money in a project may earn more than the loan rate, if that income is counted honestly, with taxes and risks. And the other way round: with a variable rate and a rising Euríbor (the interbank benchmark rate), the arguments for repaying get stronger; how the index works is covered in the article Euríbor in plain words. If the aim is to fix the payment rather than reduce the debt, compare repayment with a switch to a fixed rate, see the piece on mortgage types.
Questions and answers
Can a bank in Spain prohibit early repayment of a mortgage?
No. Under art. 23 of Ley 5/2019 the borrower may repay all of the debt or part of it at any time. The contract can only set a notice period of no more than a month.
What is the maximum early repayment fee on a variable rate?
0.15% of the amount repaid in the first five years or 0.25% in the first three years, depending on the option in the contract. After that period no fee is charged.
How much does it cost to repay a fixed-rate mortgage early?
No more than 2% of the amount repaid in the first ten years and 1.5% later, and in any case no more than the bank's real loss. The bank must hand over the calculation within three working days of the request.
Do these limits apply to a mortgage taken out before 2019?
No, old contracts are governed by their own terms and the earlier laws. For home mortgages since December 2007, Banco de España gives limits of 0.5% and 0.25%; the exact regime of your contract is clarified with the bank or an abogado (lawyer).
What is better on a partial repayment: shortening the term or the payment?
At the same rate, shortening the term usually saves more interest. Lowering the payment is more useful if monthly budget headroom matters more.
