Obtaining a Mortgage in Spain

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Mortgages for buying property in Spain are available from most Spanish banks and from some offshore banks, for both residents and non-residents. Your Spanish property will be held as security for the loan, and a charge will be registered in the Property Registry.

Most developers will have a loan scheme in place on “off-plan” purchases, but you need to be aware that these are only available on completion and will not cover any stage payments i.e. normally 30% deposit. Resale properties are also sometimes offered for sale with a mortgage in place that can be easily transferred.

What is the cost of arranging a mortgage?

The cost of a Spanish mortgage varies greatly from lender to lender and also from broker to broker. Generally you should allow between 2-3% of the purchase price of the property.

As a Spanish mortgage is attached to the property and not the owner it has its own title deed. You will have to pay for the deed to be produced and also land registry and notary fees. The cost of this varies from area to area and on the value of the property.

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Valuation fees vary depending on the value of the property and the valuation company but start at about €200 for a small apartment.

Also you have the services of a mortgage broker and again this can vary tremendously. Some charge nothing and just rely on the commission the banks pay them whilst others charge up to 1.5% of the loan. It is recommended that a broker is used if income is hard to prove as they will know which lenders are the most flexible and can save valuable time.

The break-even point for a Spanish loan as opposed to a UK loan or remortgage is approximately 5 years, so if you are considering paying the loan off in full before that time you need to think long and hard about which way to proceed as it may be cheaper to raise the funds at home.

How much can I borrow?

As general guide a non resident will be able to borrow 70%-80% of the valuation of a property, whilst residents can borrow up to 100% of the valuation. The key to obtaining the maximum mortgage offer is in achieving the maximum valuation, which is the job of the tasador (valuer). Most banks will accept valuations from 1 or 2 tasadors whilst a few employ their own.

Your income is the other determining factor and the monthly repayments have to be covered by up to 40% of your NET salary, but most banks will only accept 35%.

Land purchase is limited to 60% of valuation by most lenders, as is lending on “Finca Rustica” property.

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What Interest rate will I pay?

Interest rates again will depend on the currency you choose to borrow. Interest rates for mortgages in Euros are based on the European Inter Bank Overnight Rate, or EURIBOR for short, which has largely taken over from the older MIBOR. The lenders rate will be margin over EURIBOR generally EURIBOR + 0.75% to 1.5% but individuals circumstances can dictate higher or lower rates. Fixed rate mortgages are available at slightly higher interest rates. Some lenders offer a lower start up interest rate for the first year or part interest only mortgages, ideally suited for funding new construction.

What is the maximum repayment period?

Most commonly, 15 or 20 years, but up to 35 years can be arranged.

What information will the bank require?

Banks vary in the amount of information that they require, but in general the more you can provide the easier the loan is to procure. Ideally the following would be good:

If you are employed:

  • Last 3 wage/salary slips
  • Latest P60
  • Last 6 months bank statements
  • Reference letter from your employer confirming date of employment, proof of income and position and prospects within the company
  • Bank reference (The lender may have to apply for this themselves depending your bank)
  • Some lenders require an experion credit check to be carried out
  • Copy of passport/residencia.

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If you are self employed:

  • Last 2 years tax returns
  • Copies of accounts for the last 2/3 years
  • Charted accountants copy report, confirming your annual personal drawings from the company
  • Copy of your passport/residencia
  • 6 months personal bank statements
  • Bank reference letter.

You will also need:

  • In relation to a specific property, the nota simple from the property registry, offer letter or sales purchase contract.
  • An NIE number from your local police station, which you or you lawyer can arrange.
  • You will also need to open a Spanish bank account and it is advisable to use the same bank as your mortgage is with.

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If something goes wrong

If you have any problems regarding your mortgage you should first consult the local branch of the lending institution.

This table shows monthly repayment in euros for every 10,000 euros borrowed.

Interest Rate 15 year 20 year 25 year 30 year
2,000 64,35 50,59 42,39 36,96
2,250 65,51 51,78 43,61 38,22
2,500 66,68 52,99 44,86 39,51
2,750 67,86 54,22 46,13 40,82
3,000 69,06 55,46 47,42 42,16
3,250 70,27 56,72 48,73 43,52
3,500 71,49 58,00 50,06 44,90
3,750 72,72 59,29 51,41 46,31
4,000 73,97 60,60 52,78 47,74
4,250 75,23 61,92 54,17 49,19
4,500 76,50 63,26 55,58 50,67
4,750 77,78 64,62 57,01 52,16
5,000 79,08 66,00 58,46 53,68