Euribor: how your payment is recalculated at your variable-rate mortgage review

On a variable-rate mortgage, the rate you pay is the 12-month Euribor plus the agreed margin, and it is reviewed once a year on the date stated in your deed. Using that new rate, the outstanding balance and the years remaining, the monthly payment is recalculated.

Most variable-rate mortgages in Spain are reviewed every 12 months. When the date arrives, the bank takes the Euribor value published in the reference month and adds it to your margin. That sum is the rate you will pay for the trinc year. Nothing more, nothing less.

## What is added and what is used to recalculate the payment

The interest rate on a variable-rate mortgage has two parts. One is the reference index, which in almost all cases is the **12-month Euribor**. The other is the margin each client agreed with their bank on signing day. The sum of both is the applicable rate.

With that rate, the payment is recalculated by applying it to the remaining balance and the term left to pay. Three figures are needed: outstanding balance, new rate and years remaining. From these comes the monthly payment you make until the next review.

That is why two people with the same Euribor can see very different increases. It does not depend only on the index. It depends on how much they still have to pay and how many years are left.

## Why your increase is nothing like your neighbour's

A high outstanding balance with many years ahead feels every percentage point far more than a loan that is nearly paid off. Same Euribor, same month, same margin. And final payments that have nothing in common.

The agreed margin also matters. Some mortgages were signed with margins below 1% and others well above it. That percentage stays for the whole life of the loan and is not renegotiated by itself.

Before the review date arrives, you can ask the bank for a simulation. They are required to give you clear information. You can also use an amortisation schedule and try different rates and terms to get an idea.

## Checking the review and getting ahead of it

Note your review date in the calendar. If the Euribor has risen since last time, adjust your budget a few months in advance instead of waiting for the shock. When the review comes, check that the bank has applied the Euribor value for the correct month. Mistakes are rare, but checking takes two minutes.

If the new payment is a strain, talk to the bank before missing payments. Renegotiating is better than defaulting. Always.

This is general information, not personalised financial advice. For your specific case, consult a professional or your lender.