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PROPERTY

Renting in Spain: What’s the maximum amount a landlord can ask as a deposit?

How much can landlords in Spain require from tenants to pay as a deposit or guarantee when they rent out their property? Are two months of “fianza” deposit legally allowed as is becoming increasingly common?

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For many tenants, showing proof they have a stable job means they can negotiate not having to pay a guarantee into the bank. Photo: Ibrahim Boran/Unsplash

Renting a home in Spain can have its challenges for both landlords and tenants. 

Homeowners want a trustworthy long-term tenant that will pay on time and not damage their property, whereas renters need to provide guarantees that they are solvent. 

The solution to this is in the vast majority of cases the payment of a fianza, a deposit paid to the landlord that would cover the cost of any damages caused by the tenant and paid back if there is no need for any repairs at the end of the tenancy. 

Then there’s the aval or garantía adicional, a guarantee which is usually deposited in the bank by the tenant, a sum which is only available to the landlord in the event of non-payment of rent. 

Some landlords will instead prefer to ask tenants for their nómina, proof of a fixed contract with monthly earnings.

All this can represent a fair amount of money for tenants to cough up, as fianzas or avales are usually equal to one or more months’ rent. 

So what does Spanish law say about the maximum amount that landlords can ask from tenants as a deposit?

According to Spain’s Urban Leasing Law, landlords can only request one month’s worth of rent as a deposit (fianza) and in fact must as it is legally required.

Spain’s Consumer Affairs Ministry also clarifies that the maximum amount that can be required as guarantee for rent payment (aval) is two months of rent. 

Landlords can also ask for a maximum of one extra month’s rent payment in advance, usually only requested from prospective tenants to guarantee their intention to move into the property. 

That means that as a maximum amount of rent a landlord can require from a tenant at the start of their contract is four months’ rent: three months of rent (one for fianza, two for aval) and the first month’s rent. 

Although the legal limit already represents a sizable amount of money for tenants, there are reports of landlords asking for up to five, six or more months’ rent in advance in Spain, something which is not legal and such extortionate clauses in rental contracts can be punished in a court of law. 

As for requiring a nómina or declaración de la renta (annual tax declaration) from budding tenants, there is no mention of this in Spain’s Urban Leasing Law and therefore cannot be deemed illegal. 

For many tenants, showing proof they have a stable job means they can negotiate not having to pay an aval as they technically can offer a greater guarantee that they are solvent, although this system is frustrating for Spain’s self-employed. 

Unfortunately, Spanish banks charge interest to the tenants for keeping their aval open, even though it’s money that’s just sitting in an account and can’t be accessed, so once your landlord knows you pay on time it’s advisable to try to negotiate the end of this guarantee.

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PROPERTY

What the Euribor rise means for property buyers and owners in Spain

The rise in the Euribor interest rate, used to calculate mortgage payments in Spain, is causing big changes in the mortgage rates.

What the Euribor rise means for property buyers and owners in Spain

Looking to buy property in Spain? Already a homeowner here? Well, you may have heard something about rising interest rates recently.

Or perhaps changes to the terms of your mortgage. Or the Euribor – but what is it, and what’s going on?

What is Euribor?

In Spain, Euribor is the interest rate most often used to work out mortgage payments and to calculate both variable and fixed rates.

It is anchored to the interest rate set by the European Central Bank, and, as we are now seeing, quite responsive to global economic events.

It’s the interest rate that banks in the Euro Zone use to lend to each other, so when the base rate goes up, the Euribor does too, which sends mortgage interest rates across the Eurozone rising. 

Rising rates

Most Spanish mortgages with variable rates normally vary based on a variety of factors, but this number has been rising and in May 2022 saw figures of 0.240 percent (Tuesday May 17th), well above the average. 

The rises throughout May are leading many in Spain, and indeed across Europe, to wonder how high their mortgage rates can go, and when the rises will stop.

Banco de España has estimated that the increases could range from anything between €35 a month to an additional €400. Bankinter predicts the Euribor rate will finish the year at a staggering 0.40 percent, but, more encouragingly, Caixabank’s prediction puts it at just 0.13 percent by the end of 2022.

On Euribor.com.es, a website that tracks the index on a daily basis, they suggest that the market consensus predicts the Euribor will finish at around 0.3 percent at the end of the year, but could reach as high 0.8 percent in 2023.

All of them agree, and most other economic indicators suggest, that whatever the figure at the end of the year, it will remain positive, so it seems almost certain that mortgages will continue to rise throughout 2022 at the very least.

This instability, in addition to global inflation and supply chain problems, could mean that mortgage rates will be affected at least until 2023, with some predictors even signposting 2024 as the possible end of a rise in mortgage prices.

With things uncertain in the mortgage industry, and the world economy more broadly, perhaps you’re thinking of ways to try and insulate yourself from the climbing interest rates.

How to protect yourself from the rising rates

One way to weather the storm of interest rate increases is to change your mortgage from a variable to a fixed rate, either by negotiating with the your bank or by changing bank altogether – a process known as subrogation.

According to data from MyInvestor, during March and April the number of subrogations has started to rise.

Subrogation basically means switching the mortgage from one bank to another to change its interest rate. Although it does involve certain charges in order to do so – you pay the valuation of your house, which normally costs a few hundred euros, and a fee charged to the bank you are leaving, which can cost up to 2 percent of the outstanding amount – it could, and probably would, work out cheaper than paying the hiked interests rates over time.

You could also try and take out a new mortgage with another bank and use the borrowed money to settle the loan. This is, of course, a more expensive option as you have to pay the appraisal, the commission for early repayment of the current credit (again, up to 2 percent of the outstanding amount) and the expenses associated with its cancellation of registration, which normally runs to around €1,000.

READ ALSO: Spanish mortgages – Ten things foreigners should know before getting one

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