The Spanish property market has, for the last couple of years, started to pick up after a nosedive following of a serious economic slowdown in the country. It is expected that the market will remain vibrant and for this reason, many ex-pats are looking to buy property Spain. The good news is that there are no restrictions for foreigners looking to buy property in Spain. If you plan to do so, talk to the UK and Spanish qualified lawyers specialised in Spanish law to find more details on Spanish mortgages. They will let you know if it is necessary to have your documents translated into Spanish, or whether you need to meet any specific requirements.
How easy is it to get a Spanish mortgage as a non-resident?
Getting a mortgage as a non-resident in Spain is quite easy and this is evidenced by the fact that many foreigners are now buying property in Spain. However, the conditions that non-residents have to meet are more demanding than residents. This is because, in case of default of payment, it is harder for the bank to seize assets from abroad.
Foreign citizens can be granted loans by financial entities even if they do not have residency in Spanish national territory or if they do not have the main focus for their activities in Spain. The modality of mortgage loans is valid for those who pay their taxes outside the Spanish territory, regardless of their nationality.
How to get a mortgage in Spain – Application process
The official application process only starts once the sales agreement has been reached. The documents needed to apply for a Spanish mortgage, at minimum, include:
- An NIE number or passport
- Proof of income or employment contract
- Tax returns
- Details of your current debts, loans, and mortgages
- Copies of your property deeds, both in Spain or outside
- Proof of your current assets and bank statements
- Proof that the property tax has been paid
- A pre-agreement with the seller
- Any prenuptial agreement if applicable
Here is the step by step guide showing the process of applying for a mortgage as a foreigner:
- Step 1: Prepare all the required documents
- Step 2: Ask different banks for pre-offers for comparison purposes
- Step 3: Decide on the bank that best suits your needs
- Step 4: Submit your application form with the required supporting documents
- Step 5: Wait for a decision from the lender
- Step 6: Open a bank account and deposit money to fund the mortgage
- Step 7: Sign the mortgage paperwork
All the conditions must be met before mortgage approval in Spain. Once you have submitted your request to the bank, and everything is in order, they’ll give you their offer
How much can you borrow for a mortgage in Spain?
When you’re buying property in Spain, the entity doesn’t give you a 100% mortgage. Instead, it will give you a loan for an amount not exceeding 80% of the property’s value. For example, if the property is valued at 1,000,000, the bank will only grant you up to 800,000. You will need a minimum deposit of 20% of the property’s purchase price. This is not the only reason you will need to have some savings – there are other costs that you should pay when setting up a mortgage.
There are several costs involved when taking out a mortgage. These are either the responsibility of banks or the buyers. They include:
- Valuation fee
- Mortgage fee
- Stamp duty
- Notary fee
- Land registry fee
- Paperwork costs
- Insurance policies
- Subrogation fee
Advantages and disadvantages of taking out a loan in Spain
In as much as there are compelling reasons to take out a Spanish mortgage, there are disadvantages too. Let’s take a look at the advantages and disadvantages:
- You have a bigger working budget
- More potential profit
- Extra due diligence to the property
- Higher cost when it comes to repayment
- Higher risk to the purchase because property prices keep rising and dropping
- If you default, the bank claims your personal assets
Types of mortgages in Spain
Spain offers different types of mortgages including the usual type of mortgages with additional expat-focused mortgages. These are offered by both Spanish banks and international banks. They include:
- Non-resident mortgages
- Mortgages for retirees
- Commercial mortgages
- Construction mortgages
All the above-mentioned mortgage types have different mortgage conditions, loan-to-value levels, periods of repayment, and interest rates. The main types of interest rates available for Spanish mortgages include:
- Variable interest – this is the most popular type of mortgage, as it allows the opportunity to take advantage of cheap money. However, the rates could change and if the future interest rates rise, property buyers would require to pay more.
- Fixed interest– this option has higher costs but on the brighter side, property buyers know how much is the monthly repayments for the entire duration of the mortgage
- Interest-Only – this option has lower monthly repayments but takes extra time to pay. After duration of the mortgage, this mortgage usually is more expensive compare to other mortgages.
Tips to consider before obtaining a mortgage in Spain
If you are taking out a Spanish mortgage, you should take a note of the following tips to ensure a smooth and straightforward process:
- Weigh all the pros and cons. If you are a non-resident, the terms would be as favourable compared to if you are a resident. See if it is worthwhile or not.
- Plan ahead as this will give you ample time to compare the different options available. If you wait until the last minute, you will be in such a hurry and could make some decisions that will cost you.
- Prepare your paperwork in advance to show proof of earnings, loan record, and address. Your mortgage application will take about 2 months to process.
- Shop around to see what the various mortgage lenders have to offer. See what terms and conditions are most favourable. Find out if all the costs of the mortgage are the buyers’ responsibility or not.
- Think about the long-term implications before committing yourself to a bank that may tie you to its products and restrict your ability to change to another bank with better terms. Always read through the contract before signing. The usual term is 15 to 20 years and this is a long financial commitment to play around with.
If you are trying to consider the financial implications you may have when you take out a mortgage and the interest rates rise due to that, we advise you to seek the help of a professional for more expert advice. This will enable you to make a savvy financial decision depending on your circumstance.
Shop around for different mortgagees and always go for the option that has low charges on its fees. Do thorough research to avoid any hidden charges on your loan. If it is possible, you should also use a reputable mortgage broker to help you with the process. This will save you so much time and money.