Spain is a great country to live in for those looking to buy property. The Spanish banks offer a wide range of mortgage products to buy homes in Spain. Although it is generally available to residents of Spain, this does not mean foreigners or non-residents cannot obtain mortgages. In this article, we will outline everything you need to know about mortgages in Spain.
Before applying for a Spanish mortgage
Local Spanish banks and international banks usually offer mortgages to home buyers in Spain. In the past Spanish banks offered foreign borrowers mortgages of up to 60% or 70% for purchasing a second home. In general, mortgage terms and conditions vary because they are based on different factors. Before you apply for a Spanish mortgage, you need to pay attention to the following points:
- Are you going to live in Spain as a resident?
- Do you have a good understanding of your financial situation?
- How much do you want to pay for the cost of financing?
- Do you fully understand the tax implications of buying a house in Spain?
- What is the purpose of buying a property in Spain with mortgages?
- Is your property in Spain your first home or second home?
- Will you be willing to apply for mortgages in Spain with a broker or mortgage agent?
General mortgage conditions for expats in Spain
As a general rule, buying a property with mortgages in Spain for non-residents or foreigners can be difficult. While some Spanish banks do not lend money to people living abroad, whether Spaniards or non-nationals, many others will. If you are from the UK, it is possible that some Spanish banks have their representative offices in the UK and will be able to provide you with information about different mortgage products in Spain.
Mortgage Rates and Mortgage Terms
The conditions are generally more favourable for residents living in Spain. The maximum mortgage in Spain is usually 80% of the purchase price for a primary home. The interest rate is from 3 to 4% per annum, and Spanish mortgage terms usually range from 5 to 40 years. Please note that this is just a general rule. The mortgage rates and terms are affected by the fiscal situation of the property buyer.
Non-residents can obtain mortgages in Spain with greater difficulty for non-residents. Non-residents may need to pay 1 to 2% higher interest rates than they would if they were residents in Spain. The usual maximum repayment period is 20 years for residents, while non-residents can extend it to up to 40 years. Non-residents usually cannot borrow more than 60% of the value of the property in Spain. If you are looking to purchase a home in Spain, you will likely need a 30-40% deposit to secure a mortgage. The cost for mortgages will be significantly higher for non-residents.
If you are looking to purchase a home in Spain, you will likely need a 30-40% deposit to secure a mortgage. The cost for mortgages will be significantly higher for non-residents.
If non-residents buy a second home in Spain, they will find it harder to get a mortgage with favourable terms. The financing costs will be more expensive for non-residents. It is still possible to get a mortgage with lower financing costs in Spain for non-residents. However, the banks usually require you to buy other financial products such as home insurance, investment funds, structured notes or shares of the banks.
Mortgage in Spain as a Foreigner
If you live in Spain and buy a house in Spain, you can enjoy a mortgage rate and terms similar to other Spaniards. Banks or mortgage providers in Spain usually will assess your creditworthiness, income, and affordability ratio and see if you can repay the debt on time. Usually, your debt repayments do not exceed 35-35% of your net income. If you want to obtain a mortgage easier, you may also consider having a Spanish company register you in Spain.
The process of obtaining a mortgage is usually straightforward. The banks will require the following documents:
- Passport Copy;
- Copies of the latest 6 months’ personal bank statements
- NIE number (if you already have it)
- Proof of employment or income;
- Latest 2 years’ annual tax statements showing gross and net income;
- Full credit report of your home country;
- Purchase or reservation contract with the property seller;
- Details of other mortgages or loans that you may have;
- Certificate from labour department or work authorities (showing your past work history);
- Bank reference letter;
- Marriage certificate or any prenuptial agreements (optional)
- Utility bills (gas, electric or water) proving residence
- Proof of ownership of the real estate in Spain or another country
Most will not require all documents listed above. The documents required for a mortgage application will vary from bank to bank. Some banks may even require documents to be translated and certified in Spanish. You need to confirm with the bank what is required before starting to prepare your mortgage application.
Mortage in Spain as a Non Resident
If you are not a resident in Spain and decide to purchase a property in Spain with mortgages, you may face the following situations:
- There are far more limitations than for residents in Spain
- Most Banks in Spain will be willing to lend between 50% to 60% loans to non-residents
- Non-residents are expected to pay more on the cost of financing
- Only fixed-rate mortgages may be offered to non-residents. Variable mortgages are usually not available
- Credit rating issued by your home country is usually required by the bank
- Mortgage terms and conditions vary between nationalities and citizenships of the foreign buyers
- Banks in Spain are usually willing to offer mortgages to citizens of the UK, Germany, USA, Australia, New Zealand, Hong Kong and Singapore
- Citizens of China, Turkey, Russia or countries on the sanctioned list may find it more difficult to obtain mortgages in Spain
It is not impossible that non-residents cannot obtain a mortgage for a property in Spain. It just required more preparations.
The Costs Involved in a Spanish Mortgage
Property buyers need to examine the costs associated with obtaining a mortgage in Spain and find ways to save on those costs. Some common costs associated with getting a mortgage in Spain include:
- Set-Up Fees: it’s a one-time fee for setting up a mortgage. Usually, it is about 1% to 2% of the value of the money you borrowed. This fee is sometimes referred to as opening fees, bank arrangement fees, closure fees or completion fees.
- Early Repayment Fees: If you repay the loan early than the mortgage terms, you may need to pay a fixed rate of 1% to 2%.
- Administration Fees: These include valuation, registry, notary and land registry fees.
- Insurance: this will normally include buildings insurance payable via an annual premium and may include other insurances like life policies.
- Broker Fees: If you elect to use a real estate broker in Spain to manage the property sale or purchase in Spain, you are expected to pay a broker fee.
Tax Implications of Getting a Mortgage in Spain
Whether you are a resident or non-resident in Spain, your Spanish property will have different tax implications for you. Learn more about the common taxes involved when you are getting a mortgage in Spain:
- Property Tax: it varies from region to region. It also depends on whether you buy a second-hand property or a newbuild home. These taxes are usually not low, somewhere between 8% and 10% of the property price.
- Mortgage Deed Tax: It is usually covered by the bank when you get a mortgage in Spain. It is a tax on the inception of a new loan. Usually, it is about 1.5% to 2% of the mortgage amount, depending on the property buyer loan exposure.
Which are the types of mortgages in Spain?
Spain is home to a wide range of unique mortgages for anyone looking to purchase a property. For example, Santander in Spain offers more than 5 types of mortgages to residents and non-residents. The mortgage products depend on the buyers’ profiles, such as jobs, age, and creditworthiness. In general, the banks in Spain offer 2 main mortgage options to home buyers: (1.) a fixed mortgage and (2.) a variable mortgage.
It means that the interest rate remains fixed for the life (or term) of the loan. For non-residents, banks usually only offer a fixed-rate mortgage to home buyers who wish to get a mortgage in Spain.
The interest rate is generally fixed for an initial period. After which it will periodically adjust up or down following a specified market index. In other words, it is a floating mortgage rate. If you are getting a variable mortgage in Spain, you need to pay attention to two components of the variable mortgage rates:
- Euribor: it is the indexed rate or the Euro Interbank Offered Rate. Most banks in Spain will use Euribor to calculate the mortgage rate. It is adjusted every 6 or 12 months. It means that the changes in this rate will affect the cost of your loan repayment.
- Margin: it is the number of percentage points added to Euribor. The bank determines it. The bank will usually see the credit quality of the borrowers. High credit quality borrowers usually enjoy a lower margin, while lower credit quality borrowers usually have a higher margin.
Variable Mortgage is usually available to residents in Spain only. Compared to a fixed mortgage, the variable mortgage gives you more control over the amount you pay each month.
Distressed Property for Sale in Spain
It is not uncommon to find distressed property for sale in Spain, particularly after Brexit. It is unlikely that the Spanish property market will be as badly affected as it was following the financial crisis of 2008. However, now it can be a good time to look at the repossessions and distressed sales of the property in Spain.
What about the mortgages if you want to buy a distressed property in Spain?
If you purchase repossessed properties directly from the bank, it is possible that you can get a 100% mortgage, regardless you are a resident or non-resident.
Major banks providing mortgages in Spain
Most banks in Spain do not offer set mortgages plan to property buyers. One way to get mortgages in Spain is to hire local mortgage agents for consultations. If you want to remortgage your loans, you should hire a local mortgage specialist. Here are some of the major banks that offer mortgage services in Spain:
- Banco Santander
It is one of the most popular banks in Spain. Besides, it also has representative offices in the UK. The bank offers different kinds of mortgages catering to the needs of different customers. It offers fixed and variable mortgages. If you have a mortgage in another bank, Banco Santander also enables you to change the mortgages. They also offer a special mortgage product to customers under 36 years old. You may visit here to learn more about the information.
BBVA is one of the oldest and largest banks in Spain. It offers both fixed and variable rate mortgages. For more information about their products, you may visit the link here.
CaixaBank is Spain’s third-largest lender by market value, after Banco Santander and BBVA. As the main focus of the business is loans, CaixaBank is more likely to offer mortgages to non-residents. Based on our research, CaixaBank seems to offer very competitive mortgage rates to homebuyers in Spain.
- Banco de Sadabell
It is the fourth’s largest bank in Spain. The bank also has its British unit TSB in the UK. The bank recently recorded outstanding commercial performance, even exceed Sabadell’s lending history. If you are based in the UK, you may go to TSB Bank to consult more information about getting a mortgage in Spain.
Let us know other information about mortgages in Spain in the comments below.