Arranging any mortgage abroad can be a daunting prospect and Spain is certainly no exception.
It can be difficult to know where to start, so we've outlined the key things you need to know when you're starting the process of obtaining a Spanish mortgage.
Important considerations when applying for your Spanish mortgage
When you're buying a property, and applying for a mortgage, the most important thing you can do is to get everything you need to sign property checked, and to use an independent lawyer.
You'll need to have the mortgage contract translated by an expert (e.g. your lawyer). The mortgage agreement is often written in Spanish with a translation, however you cannot be certain they are identical without confirmation by a professional.
On average, Spain has a 70% loan-to-value ratio with a maximum mortgage term of 75 years.
Types of mortgages in Spain
Non-resident mortgages (60-70%)
These are for non-residents who pay their taxes outside Spain. The maximum mortgage amount is 70% of the purchase price (or valuation if lower), but some banks have a maximum amount of 60%. For fiscal residents who pay Spanish taxes, the maximum mortgage is 80%.
Mortgages for retirees
If you are over age 60 and in receipt of a pension, you can still have the mortgage in your own name. It is also possible to appoint a guarantor such as a family member to secure the borrowing, which can have potential inheritance tax benefits if they are also a part-owner in the property.
For those wishing to build their own homes, banks offer construction mortgages. These are complicated to explain and you should definitely speak to a broker, but broadly-speaking you can potentially borrow 60-70% of the land and construction costs combined.
If you are buying a property for commercial use, such as a restaurant or a shop, for example, the maximum mortgage is 50% of the price (or valuation if lower). If you intend to run a business the lenders will ask for business plans and, where applicable, accounts for any previous business operating at the premises, as well as what previous experience you have had running a similar business.
- Initial, no obligation, assessment - speak to a brokers or complete an online form and they will advise you on whether a mortgage approval is likely and what conditions could be possible.
- Mortgage quote – following the initial assessment, your broker will aim to send a full mortgage quote within 24-48 hours.
- Sign up - if you wish to proceed, your broker will ask you to sign the terms and conditions and arrange payment of a fee of €695, which comes with a money back guarantee, so if the mortgage is declined the fee if refunded (subject to the terms and conditions).
- Submit application form – your broker will assist you with completing the relevant application form and they will submit this on your behalf with the appropriate supporting documents, which they will request once you have agreed to proceed with the application.
- Decision from lender – if the mortgage is approved, the broker will confirm the conditions and ask if you wish to proceed.
- Set up bank account and instruct valuation – a bank account will be set up and you will be asked to deposit enough funds to cover the valuation fee.
- Valuation report – if the valuation is no lower than the agreed purchase price and the property has no legal issues, the completion arrangements can be made.
- Completion arrangements – the broker will work with the bank and your lawyer and they will confirm the funds necessary for completion, which must be transferred as soon as possible to your account with the lender. Once the funds are in the account, the lender will prepare everything and you can decide on a completion date at the notary.
- Completion day – the lender will draw up all the necessary cheques and arrange payment of the property and mortgage taxes from these funds. Once the property and mortgage deeds are signed, you become the owner of the property.
The process from start to finish usually takes 6-8 weeks, but there can sometimes be delays that are outside of the control of the broker or the lender. Your broker can advise on sensible timescales for payment of deposits and timing of completion, as well as deal with any delays if they arise.
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Important mortgage considerations when buying a property abroad - (Article - Feb 2019)