Hipoteca ClaraHow a mortgage payment is calculated in Spain
Your mortgage payment is constant, but what is inside it changes every month. Here is the formula and a real example with numbers.
Most mortgages in Spain are repaid with the French system: you pay the same instalment every month for the whole term. What changes is its make-up. At the start most of it is interest and, month by month, the capital part grows.
The formula
With C as the capital borrowed, i as the monthly interest rate and n as the number of instalments, the payment is:
payment = C · i · (1 + i)^n / ((1 + i)^n − 1)
The monthly rate i is the annual rate divided by 12 (an annual 3% is 0.25% a month) and n is the number of years times 12.
A worked example
A loan of €150,000 at a fixed rate of 3% over 25 years (300 instalments) has a monthly payment of €711.32.
Here is how that payment splits in the first two months:
| Month | Interest | Capital | Payment |
|---|---|---|---|
| 1 | €375.00 | €336.32 | €711.32 |
| 2 | €374.16 | €337.16 | €711.32 |
The first month's interest is the outstanding capital times the monthly rate: €150,000 × 0.25% = €375.00. What is left of the payment, €336.32, reduces the debt. As the capital falls, next month's interest is a little lower and the capital part a little higher. After the first year you still owe €145,908.
What you pay in total
Multiplying the payment by the 300 instalments, you pay €213,395 in total, of which €63,395 is interest: 29.71% of everything you pay out. That is why a shorter term or an early repayment weighs so much on the final cost.
What changes with a variable rate
On a variable mortgage the rate changes at every review. The payment is then recalculated with the outstanding capital, the months left and the new rate, using the same formula. There is an example in the guide on fixed, variable or mixed mortgages.
Common mistakes
- Mixing up the TAE and the rate: the payment is calculated with the TIN, not the TAE. See the guide on TIN, TAE and spread.
- Forgetting what is not in the payment: insurance, fees and tied products add to the real cost.
- Thinking the payment drops when you repay early: it only drops if you choose to lower the payment. If you shorten the term, the payment stays. We compare them in the early repayment guide.
To calculate your own case, use the mortgage calculator: you get the payment, total interest and the full month-by-month schedule.