Mortgages in Spain

What is a Mortgage?
A Mortgage is quite simply a long term loan used to purchase a freehold property. The loan is normally secured against the property.

Who lends money in Spain?
Spanish Banks, Spanish Savings Banks (Caja de ahorras - similar to a U.K. Building Society), Gibraltar Banks and Building Societies are all in the market place at this time offering very favourable rates to would be borrowers, including foreign nationals. Alternatively you could be eligible for an automatic mortgage if you are buying a new property from a developer which includes stage payments while the property is being completed.

How much can I borrow?
U.K. citizens who are not resident in Spain are eligible for loans of up to 60% of the valuation of the property. Residents in Spain could borrow a maximum of 80% of the bank valuation.

Status Mortgage
For a status mortgage you will need to provide proof of income as you would in the U.K. and borrowing is normally limited to 3.5 times your annual income or 2.5 times a joint income.

Non Status Mortgage
For a non status mortgage (no questions asked) no proof of income or earnings are required but the level of borrowing is limited to 50% of the bank valuation of the property. Much more difficult to find these days.

What does it cost?
The lender would charge around 2% of the total sum borrowed as an arrangement fee + the cost of the survey, normally in the region of €210.00.

What interest will I pay?
Most mortgages offered are semi-variable in that they are linked to the 12 month Euribor ( Euro inter bank offered rate) rate, and reviewed annually. The 12 month rates vary slightly from bank to bank as each bank adds its´ own percentage to the Euribor rate normally 1.25%, but by and large the rates are close enough not to cause concern for borrowers and there is not much point in spending lots of time shopping around.
Fixed rate mortgages are available at slightly higher rates.

What period can I take the mortgage over?
You can select any period up to 25 years, depending on your age. You will normally have to complete paying your mortgage by age 65.

What information will the lender require to arrange my mortgage?

Self employed
" Copies of the last 3 years certified accounts
" Copy of last 12 months bank statements
" Copy of last 2 years tax return
" Bank reference
" Passport/residencia
" NIE (Foreigners registration number - obtained from Police Station)

Employed
" Last 6 months wage slips
" Copy of last 12 months bank statements
" P60 or copy of last annual tax return
" Bank reference
" Passport/residencia
" NIE

Additionally you will require a copy of the land registry documentation (Nota Simple - normally supplied via your agent).

How long does it take to arrange?
Normally 4-6 weeks from start to finish. This can vary depending on how quickly the property can be valued.

How much will my monthly repayments be?
Please use the mortgage calculator provided to calculate your monthly repayments.

Is it beneficial to have a mortgage?

It may be tempting to pay for the property in full, but in almost every case we would recommend some level of borrowing

1. Less tax liability

In Spain you are permitted to set the interest paid on your mortgage against your tax liability. As a consequence your annual tax bill we be reduced. More money for you.

2. Play the interest game.

Interest rates in Spain are currently some of the lowest in Europe. If you are borrowing at say 5.5% for 10 years, consider this: take the maximum mortgage that you can and invest the equivilent sum offshore or in a high growth but secure environment. You could quite easily secure an annual growth in excess of 10%. More money for you. Please take professional advice if you are considering this option.

3. Added peace of mind

Before you are granted your mortgage, the bank will go over the property with a fine tooth comb. If there are any problems with debts, charges or the title deed then these will have to be addressed as a pre-requisite to you obtaining your mortgage. Of course this is no substitute to having the services of your own solicitor but it certainly helps.

4. Selling your property on

You may have an advantage over other properties for sale that are not mortgaged. It can be quite an attractive proposition for a potential buyer to take over your existing mortgage, as they will save money. There will be no mortgage stamp duty to pay (0.05% of the capital borrowed) and there will be no set up costs (normally around 1.00% of the capital borrowed). The bigger the mortgage, the better the saving. More money for you or your potential buyer.

5. Don´t be under funded

What ever the reason for purchasing a property in Spain it will certainly be a good investment. If you intend to live here permanently or just as a holiday home it would be foolish to invest every penny you have in the property and not have that fall back position of "Rainy day Money". Be sure if you don´t have it, that´s when you will need it most.

6. Borrow sooner than later

We all know that as we get older we are less attractive to lenders for obvious reasons. Most lenders in Spain will want you to complete the repayment of your mortgage by the time you reach retirement age. If you do intend to get a mortgage then sooner is definitely better than later.