Hipoteca ClaraTIN, TAE and spread explained
Three acronyms that appear in every mortgage offer in Spain. Here is how they differ and which one to use to compare.
TIN: the nominal interest rate
The TIN (tipo de interés nominal) is the annual interest rate applied to the outstanding capital. It is the one used to calculate the payment. If the TIN is 3%, each month 0.25% is applied to the capital you owe.
Spread
On a variable mortgage, the spread (diferencial) is the margin the bank adds to Euribor. A variable rate of 3.25% with a Euribor of 2.5% has a spread of 0.75%. It is the figure most worth comparing between offers, because Euribor is the same for every bank.
TAE: the annual percentage rate
The TAE (tasa anual equivalente, the annual percentage rate) expresses the yearly cost of the loan including, besides the interest rate, the fees and other costs paid to the bank for the operation, and the effect of paying interest every month. That is why the TAE is almost always higher than the TIN. It is the figure designed to compare offers with different conditions.
An example
A loan of €150,000 over 25 years with a TIN of 3%:
| Item | Value |
|---|---|
| TIN | 3% |
| Annual equivalent of paying monthly (no fees) | 3.04% |
| TAE with a 0.5% arrangement fee (€750) | 3.09% |
An arrangement fee looks like very little, but it raises the yearly cost. The more costs an offer includes, the further the TAE moves from the rate.
How to compare offers
- Compare the TAE shown in the information sheet the bank gives you, not just the TIN.
- On variable mortgages, compare the spread and the index.
- Ask which products or insurance are tied to the rate offered and what they cost.
- On variable mortgages the TAE is calculated with an assumption about how the index will move; it is not a guarantee.
Note: the example calculates the TAE only with the fee shown. The TAE of a real offer includes every cost the bank attributes to it.
The mortgage calculator uses the TIN to calculate the payment.