Mortgage differential

A mortgage differential is a fixed percentage that is added to the Euribor
When a mortgage is requested, the bank lends the money at an interest rate. The interest rate (NIR) at which the money is loaned is calculated by adding the Euribor to the differential.
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The differential of a mortgage is a fixed percentage that is added to the Euribor. This percentage represents the part of the interest that the bank obtains as remuneration when it lends money in a mortgage. Every bank offers its mortgages with its own differential within its range of mortgages.

The Euribor is the interest rate at which banks lend money to one another. It is calculated by finding the average of the price of these loans. For mortgages, the latest published value of the one-year Euribor is used, its monthly average, or the monthly average of the half-yearly Euribor.

So the nominal interest rate (NIR) would be found by adding the Euribor from one month to the differential established by the money-lending financial institution. For example, monthly NIR: euribor of January 2016 (0.042) + differential (1.25) = 1.292% NIR.

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We hope this has been helpful. If you have other questions about mortgages, don't hesitate to get in touch with us at BBVA. We will be happy to help you.
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