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Mortgages for Expats in Spain

Author: Jim Newham
Submitted: July 2013

Having decided where you want to live and which house to buy, the next stage of buying a property is finding the money to pay for it. For anyone except the very rich, this will involve taking out a mortgage.

Eligibility criteria in Spain are based on your ability to repay, and may well be stricter than in your country. Generally, your total monthly outgoings including repayments should not exceed 35% of your net income.  Lenders may consider some forms of income outside your salary, such as that from rentals and investment, but often they do not.

Should you get a mortgage from a Spanish lender, or from one back home? Advantages of taking out a mortgage in Spain include relatively low interest rates, less administrative complexity and, should you want to rent out your property, keeping all monies  in Euros. However, given Spain’s current financial situation, it may be difficult to get a good deal.

Furthermore, mortgage products such as buy to let and popular features such as low penalties for early repayment may not be available. Many non-resident mortgages are inelastic and outdated and do not offer the flexibility many customers want. In addition, the traditional mañana culture may lead to long administration times.

This situation is gradually improving. Some lending institutions have realised that there is benefit to be had from the large numbers of non-residents buying holiday homes, and have set up non-resident departments that look on foreign lender expectations more sympathetically.

It may take a long time to find the mortgage you want – longer if you are not fluent in the local language. Spanish lenders prefer your main source of income to be a standard wage, and may disregard less regular sources of income such as dividends and self-employment. Getting a mortgage broker may help to ameliorate these problems.

Mortgage types

The repayment mortgage is the commonest type in Spain. Its terms depend on whether you qualify as a Spanish resident or not. If you have held a Spanish residence card or certificate,  and have been paying taxes in Spain for 2 years or more, you may be eligible for a Spanish Resident mortgage. This has the highest loan-to-value ratio (LTV), and the most favourable interest rate, which in Spain is linked to the European standard borrowing rate, known as Euribor. You can find current Euribor rates here:

https://www.euribor-rates.eu/current-euribor-rates.asp

This is shown, together with the other main mortgage types, in the table below. Note that, in Spain, the LTV is pegged to the property valuation amount, not the house purchase price.


Mortgage Type

LTV

Interest rate (Euribor plus…)

Resident repayment

90% to 100%

0.4% to 1%

Non-resident repayment

70% to 80%

0.6% to 1.5%

Interest only

60% to 70%

1% to 2%

No age limit

60%

2%

A non-resident mortgage can only be taken out to buy a second or holiday home. The normal maximum full repayment age in Spain is 75; the no age limit mortgage is for you if you need more time to repay.

Documents required

Though different lenders will require different documents, most will require the following:

Other Conditions

Full status only – you must be able to demonstrate your income. This makes getting a mortgage very difficult if you are self-employed. 

Term: up to 40 years.

Maximum repayment age: 70, but can be 80 in some cases.

Fees and other payments

Other charges you will have to meet include the following. Mortgage Tax, at 1.6%; Notary fees, €250-€1,000; Registry fee, €50-€500; Lender’s arrangement fee, €100-€400, plus opening commission at 0.75%-1.5%; valuation fee, €200-€1,000.

 

 



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