Direct answer: With the euribor above 3%, reducing the term is almost always mathematically more profitable because it eliminates the most expensive future interest. However, if your current payment is already high and compromises your monthly liquidity, reducing the payment gives you immediate financial breathing room. The optimal decision depends on your current rate and your cash flow situation.
The question of what is better to pay off of the mortgage, term or payment, with the current euribor has become urgent for millions of Spanish mortgage holders. Since 2022, the 12-month euribor has risen from -0.5% to levels above 4%, making variable mortgages between 200 and 400 € more expensive per month in many cases.
How mortgage amortisation works in Spain
Spanish mortgages use the French amortisation system: in the first years you pay much more in interest than in principal. As the loan progresses, the proportion is reversed. That is why paying off early is especially powerful in the first 10-15 years.
- Reduce payment: you lower the monthly payment. You keep paying for the same number of years, but each month costs less.
- Reduce term: you keep the payment, but you finish earlier. You save all the interest of the eliminated years.
The French system and why it matters
In a mortgage of 200,000 € over 25 years at 4%, during the first 5 years you pay approximately 75% in interest and only 25% in principal. Paying off 10,000 € in year 3 can save you more than 6,000 € in future interest — while paying off the same amount in year 22 will save you barely 1,500 €.
What is better to pay off of the mortgage, term or payment, according to the current euribor
The mathematical answer is clear: reducing the term always generates greater total interest savings. But the practical answer depends on your situation:
- Choose to reduce term if: your current payment is affordable, you have an emergency fund of 3-6 months and your mortgage rate is above 3%.
- Choose to reduce payment if: the current payment compromises more than 35% of your net income or if you anticipate important expenses in the next 2-3 years.
- Combine both if: you make partial annual payments — you can alternate according to your situation each year.
According to the Bank of Spain, the 12-month euribor has oscillated between 3% and 4.2% during 2023 and 2024, making early repayment a high-impact financial decision.
The tax factor
If you bought your home before January 2013, you can deduct up to 15% of the amounts contributed (principal + interest) on a maximum base of 9,040 € per year. In this case, paying off can reduce your deduction. Calculate whether the interest savings outweigh the tax benefit before deciding.
How to calculate the real savings from paying off
The manual calculation is tedious. You need to project the full amortisation table with and without the extra payment to see the difference in total interest. You can calculate your real net salary with the Uselium Advanced Net Salary Calculator to know exactly how much you can allocate to repayment without compromising your liquidity. Once you know your margin, the Uselium Mortgage Suite projects the exact savings of paying off term vs. payment with your real data.
Commission for early repayment
Mortgages signed since June 2019 under Law 5/2019 have limits on early repayment commissions: maximum 0.25% during the first 3 years and 0.15% between years 4 and 5. From year 5 onwards, no commission. Older mortgages are still governed by their contractual conditions — check your deeds.
- Fixed-rate mortgage: commission up to 2% (first 10 years) and 1.5% (remainder).
- Variable-rate mortgage: maximum 0.25% the first 3 years.
Conclusion: calculate before paying off
The question of what is better to pay off of the mortgage, term or payment, with the current euribor does not have a single answer. Mathematics favours reducing the term, but your personal financial situation may make reducing the payment the smartest short-term decision. What you should never do is pay off without calculating the real impact — use the available tools and make an informed decision.
How to combine repayment and liquidity without losing sight of the goal
When a person decides to pay off the mortgage early, they are usually thinking about reducing future expenses or gaining financial stability. But the best result is not always the one that generates the most mathematical savings. Sometimes, a strategy that aggressively reduces the term can compromise the ability to face unforeseen events or to allocate resources to other objectives, such as an emergency fund or a more diversified investment. The decision must take into account the full context of your life, not just the debt.
A good rule is to think of repayment as a risk management tool. If your income is stable and the payments are not a burden, reducing the term can be a very sensible option. If, on the other hand, your cash flow is tight, reducing the payment can give you more room to live with less tension and maintain long-term saving capacity. Not everything that looks optimal on a spreadsheet is optimal in practice.
For this reason, the decision should be reviewed frequently. Circumstances change, income evolves and the capacity to assume debt also changes. The smartest repayment is the one that lets you sleep peacefully and move forward without putting your future stability at risk. The goal is not just to pay less interest, but to build a financial system that resists over time. A solid strategy combines savings, room for manoeuvre and an annual review of your priorities.
- Compare the total interest savings with the monthly impact on your liquidity.
- Assess whether your current payment leaves room for real unforeseen events.
- Think about the horizon of the next five or ten years, not just the present.
- Consider partial payments when you have surpluses.