How to Get a Mortgage in Spain

Thursday, February 25, 2016

How to Get a Mortgage in Spain

The lending landscape changed irrevocably after the downturn, but how easy is it to get a mortgage in Spain and how much does it cost?

How do you get one?

This year the Spanish property market is bouncing back in a big way after a few tough years in in many popular areas of the Costas. We don't need to spell out the reasons why Spain has so many things to offer, but with the pound so still so strong and excellent property deals it's a great time to buy a home there.

Whilst many of you may be thinking of paying in cash, others may be keen to learn that the opportunities to borrow money in Spain have increased in the past couple of years so do research this option too.

Mortgage lenders in Spain

Taking out a mortgage from an experienced Spanish lender comes with a lot of added benefits. Firstly it should be mentioned that Spanish lenders are authorized by the Bank of Spain (Banco de España) and subject to its supervision.

From the offset you will be working with an institution that knows the country and how things work. Their staff - some of whom will be trained to deal with buyers from overseas - will guide you through the home-purchase process in your own language.

Their property survey will give you some added reassurance about what you are buying. Their due diligence on the property will ensure it is legal and unencumbered.

Their lawyers will accompany you to the notary to guarantee there are no gremlins in the paperwork and that everything is signed correctly - and that the ownership of your new property is registered correctly

Having said that, of course taking on a mortgage is a big decision. For everything to work out seamlessly, both parties - the client and the entity - need to be responsible and conscious about all the implications of a mortgage. It's important to get all the information you need in order for you to make the right decision.

Here are some basics:

  • Finance up to 70 per cent of the house purchase value
  • Fixed Rate Mortgage or Variable Rate Mortgage
  • Long-term mortgage, of up to 25 years
  • Maximum age at end of the loan of 75 years
  • Total loan repayments should not exceed 35 per cent of your net monthly income
  • Home insurance mandatory by Spanish law

Mortgages for new-builds:

Each builder has negotiated with his own bank mortgage conditions for the buyers. Nevertheless, the buyers may arrange a mortgage with another Spanish lender if they can get better conditions.

The builder generally provides a mortgage offer but it is not mandatory. Mortgages for new-builds will share the characteristics above outlined above.

How much does it cost to arrange a mortgage?

  • House valuation fees: maximum €500
  • Up to 4 per cent mortgage registry fees, notary fees, bank solicitors, mortgage tax
  • Opening fee, up to 2 per cent
  • Redemption fee, up to 0.50 per cent
  • So allow in total up to 4 per cent on top of your other closing/purchase costs

The 6 steps to getting a mortgage:

  1. Do you know how much you can borrow? Your mortgage expert will advise you
  2. Provide the requested documentation to apply for a mortgage
  3. With the bank's approval you will agree a deposit to purchase your home
  4. Apply for your NIE number in the police station (a required Spanish identification number)
  5. Sign all the pre-contractual documentations requested by the Banco de España (Bank of Spain) confirming you understand and agree to all the conditions
  6. Sign the mortgage deeds at the notary along with the house purchase deed
A Place In The Sun

Originally published in the A Place in the Sun magazine - Issue 123