Nominal rate (TIN) vs APR (TAE) on a mortgage

When you compare mortgage offers in Spain, two percentages appear that look the same but are not: the TIN (the nominal interest rate) and the TAE (the APR). Understanding the difference between them is what lets you tell which mortgage is genuinely cheaper, because two loans with the same interest rate can cost very differently depending on the fees attached to each.

What the TIN (nominal rate) is

The TIN (Tipo de Interés Nominal, the nominal interest rate) is the percentage the bank applies to your outstanding capital to work out the interest. It is the number used directly in the monthly payment formula of the French repayment system (the one this calculator uses):

Where C is the capital, i is the nominal rate divided by 12 (the monthly rate) and n is the number of months. On its own, the nominal rate includes no costs: no fees, no insurance, not even how often interest is charged. That is why it is an incomplete figure for comparing offers.

What the TAE (APR) is

The TAE (Tasa Anual Equivalente) is Spain's APRC (Annual Percentage Rate of Charge; commonly called APR), a measure designed precisely for comparison. It reflects the real annual cost of the loan because it incorporates three things the nominal rate ignores:

• Compounding: because interest is charged month by month, the effective annual cost is slightly higher than the nominal rate.
• The arrangement fee, which by law already covers the study, processing and granting of the loan (they are not charged separately).
• Certain costs and insurance that are a condition for obtaining the loan or affect its price.

By construction, in this calculation (with monthly compounding) the APR is normally equal to or higher than the nominal rate. If a mortgage had no costs at all, its APR would be only slightly above the nominal rate (because of monthly compounding). As soon as you add fees or linked insurance, the APR rises and pulls away from the nominal rate.

Why the APR is what matters when comparing

Imagine two mortgages advertised with the same nominal rate. At first glance they look identical. But one might carry an arrangement fee of several hundred euros and require linked insurance, while the other carries nothing. The monthly payment of the "pure" mortgage will be the same in both (it depends only on the nominal rate), but the total cost will not. The APR captures that difference in a single number: that is why, when two offers have a similar nominal rate, the one with the lower APR is usually the cheaper one.

Be careful, though, comparing the APR between loans of very different amounts or terms: the APR is a rate, not an amount. For big decisions it is also worth looking at the total cost in euros over the whole life of the loan, not just the percentage.

Illustrative example: same nominal rate, different APR

Let's see it with figures. We start with two mortgages identical in the essentials:

• Capital: €150,000
• Term: 25 years (300 monthly payments)
• Nominal rate: 3.00% in both

With the French formula, the monthly rate is 3.00% / 12 = 0.25%. The payment comes out the same in both mortgages, because the nominal rate is the same:

Over 25 years you pay 300 instalments. The exact total is €213,395.09 (of which €63,395.09 is interest), calculated with the unrounded payment of €711.31697; multiplying the already-rounded payment (€711.32 × 300) would give €213,396, a difference due only to rounding. Up to here, the two mortgages are indistinguishable. The difference is in the costs:

• Mortgage A — no costs: no arrangement fee, no countable linked insurance.
• Mortgage B — with costs: an arrangement fee of €1,500 (1% of the capital) and a linked insurance of €300 per year that is a condition of the loan and therefore counts towards the APR. Over 25 years that insurance adds up to €7,500.

The APR is found by looking for the rate that equals the money you actually receive with all the payments you actually make. In mortgage A you receive the full €150,000 and only pay the instalments; in B, the arrangement fee reduces the net capital received to €148,500 and each year the insurance is added to the payments. The result, calculated with the comparison tool, is:

Same 3.00% nominal rate and yet the APR jumps from 3.04% to 3.47%: almost half a point of difference that the nominal rate, on its own, was hiding from you. Translated into euros, mortgage B costs you the €1,500 arrangement fee plus €7,500 of insurance over the loan: around €9,000 extra that the monthly payment does not reflect. That is why mortgage A's APR is the signal that it is the cheaper option, even though the advertised nominal rate was identical.

Calculation note: the 3.47% APR assumes the linked insurance is charged with the payments of months 1, 13, 25, …, 289 (that is, at the end of those months), once for each of the 25 annuities. When working out the APR of a real contract, the actual charging dates of each cost should be used, which may change the result slightly.

Compare the payment and the APR with our calculator

Which costs count towards the APRC (and which don't)

Not every mortgage cost is included in the APRC (TAE). The ones that count form part of the total cost of the credit: those that are a condition for obtaining the loan or part of its price (Article 4 of Law 5/2019).

• They count: the arrangement fee (which by law already covers the study, processing and granting of the loan, art. 14.4 LCCI), any linked insurance the bank requires as a condition of the loan, and the valuation (tasación) when it is necessary to obtain the credit.
• They don't count: costs you would pay regardless of the loan, insurance you take out voluntarily that does not affect the rate, and — by express legal exclusion — the taxes for registering the transfer of ownership.

Because the line depends on the specific terms of each offer, the practical approach is to decide case by case which cost you mark as countable. To see the exact effect in your case, you can enter your own costs in the calculator and tick individually which ones count towards the APR.

Summary

• The nominal rate (TIN) is the "bare" rate: it only serves to work out the payment, not to compare.
• The APR (TAE) includes compounding and linked costs, which is why it is the figure for comparing offers.
• Two mortgages with the same nominal rate can have very different APRs: always check the APR and, in addition, the total cost in euros.
• The FEIN the bank gives you sets out the binding offer and the figures calculated under its conditions and assumptions; for a variable-rate mortgage, the APR, payments and effective cost may change.

Official sources

• Law 5/2019 (LCCI) — art. 4 (definition of total cost of the credit and APRC/TAE), BOE consolidated text.
• Bank of Spain — Bank Customer Portal (nominal rate and APRC).

Notice: this guide and the calculator are for information and educational purposes. They are not financial advice or a loan offer. The calculations are indicative estimates; your bank may apply different rounding, fees or linked products. Before taking out a mortgage, check the lender's official terms and, if needed, an independent financial adviser.