Thinking of buying a property in Spain? On 28th April 2020 we hosted a live webinar "Ask the Experts: Buying in Spain" (watch the full session here). Below we answer the most popular questions about the process of buying a property in Spain, with input from a Spanish lawyer. For more FAQs from this webinar, including residency, the buying process, rentals and more, click here.
All answers are correct as of the date of publication.
How easy is it to get a mortgage in Spain?
For applicants that meet a bank's criteria (including deposit size, not exceeding a certain level of monthly debt compared to your net monthly income, age, income security) the application process is straightforward. A good broker will know which banks suit your financial profile and the financial documents that will be required.
UK or Spanish mortgage broker?
Definitely a Spanish broker. It’s important to have someone on the ground in Spain having regular meetings with bank directors and speaking fluent Spanish, which helps immensely when negotiating the best mortgage conditions for buyers. Many Spanish banks are now refusing to work with overseas brokers.
Is there a minimum amount to obtain a mortgage in Spain?
Even applicants with a strong financial profile will have to provide a deposit of at least 30% of the property price, but for many British clients this is now 40%. In addition to the deposit money, you will also need funds to cover the fees and taxes relating to both the property purchase and the mortgage. This is in the range of 12-15% of the property price, depending on the area of Spain.
What are the major differences between [the UK and Spain] applying for and securing a mortgage?
In the UK, the underwriting process is quicker and usually the loan-to-value (LTV) achievable is higher. Interest rates are quite similar these days. Interest-only mortgages are not available in Spain and nor is equity-release. Refinancing is not the norm, so when you take out a mortgage the rate is usually fixed for the full term, unlike in the UK where borrowers negotiate mortgage terms for a limited number of years and then renegotiate the terms or switch lenders.
What % pre-tax income would a lender look at when considering a mortgage application in Spain?
In terms of what you can borrow, the banks calculate around one-third of your net monthly income and that has to be enough to cover your monthly existing debts - including any rent you might pay - plus the new Spanish mortgage. Unlike the UK buy-to-let market, potential rental from an investment property won't be taken into account when assessing your income.
Would Brexit change our ability to access Spanish mortgages?
Recent changes to Spanish mortgage legislation have made it harder for applicants earning in currencies other than euros to qualify for a mortgage. However, this is not a side-effect of Brexit and Spanish banks are still lending to non-residents that earn in non-euro currencies. A qualified Spanish broker will be able to advise on the current legislation and will know the best banks to approach for applicants whose income is in sterling. Spanish banks have always offered
(with contributions from Alex Radford of My Lawyer in Spain and Mortgage Direct)