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How to get a mortgage in Spain

How to get a mortgage in Spain

Whether you want a buy-to-let or you’re relocating overseas, Spain is a great place to invest in property and there are many ways you can go about purchasing the perfect house at the right price. For many, getting a mortgage from a Spanish lender is the quickest, cheapest and most reliable way to get the house you want.

Spain is currently experiencing one of the lowest interest rates in the country’s banking history so mortgage financing is highly competitive and there are plenty of options available on the market.

Since 1994 there have been standardised government-imposed regulation protecting lenders, and obliging financial institutions to operate in a transparent and responsible manner.

You may want to read the Kyero blog on financing your Spanish home to help you decide if a Spanish mortgage is for you.

Step 1. To get a mortgage in Spain you need ID and a deposit

You will need to apply for an NIE number. Without one, you won’t be able to complete any paperwork. People already renting in Spain can do this at a local police station. If you’re moving from overseas, you can apply through the Spanish consulate.

You will also need a Spanish bank account in order to pay your deposit so open one as soon as you can!

Make some important decisions about what kind of property you want and where you want to buy. You can search on our property database to then use our budget calculator to work out the kind of mortgage you’ll need and the amount you might have to borrow.   

It’s advisable to begin your overseas real estate hunt at the same time as securing a mortgage offer. This is because it’s unusual for Spanish banks to sign off the risk of your loan (securing a mortgage in principal) without a specific property and it’s Nota Simple (a legal report from the Land Registry) in the application. It is possible to change the property and the corresponding Nota Simple during the mortgage application process.

 

Step 2. Calculate extra costs

Spanish banks will usually offer terms of up to 25 years. People in receipt of a pension may need a guarantor but can still get an offer up to the age of 75 years old. There is a debt-to-income calculation that assesses your ability to pay off the debt, this is usually 30-35% of your total income.

Taxes

There will be transfer and stamp duty taxes to pay on your property. These will depend on the price of the house.

Bank fees

You will need to pay various fees to your lender for opening an account, assessments and valuations. These tend to be fixed by the mortgage lender.

The combination of the tax and bank fees is usually around 10% of the property value.

 

Step 3. Choose a Spanish mortgage provider and product

Take advice from a reputable mortgage broker. Someone with good contacts in the industry will help reduce your overall costs.

Make sure the lender you choose is authorised by the Bank of Spain. Banco Santander, Banco Bilbao Vizcaya Argentina, and Caixa Bank are the largest, but there are many more options.

Make sure the institution you choose has regional branches near your new residence, and check to see if they have in-house professionals trained to deal with your circumstances.

The amount you can borrow for a home-owner mortgage depends on whether you are a Spanish resident for tax purposes or not. People who pay their taxes outside Spain or buy-to-let buyers will be offered up to 60-70% of the purchase price based on their valuation, whereas for residents who pay Spanish taxes, the loan-to-value can be closer to 80%.

Off-plan home developers may oblige you to get a mortgage from their chosen bank. You can compare their rates with other providers but you may be contractually tied to this lender.

A repossession may only be available to buy through the bank that owns it, but you could get up to 100% of the house price financed.

You can get a construction mortgage if you’re buying land for development, but as these are complicated it’s advisable to speak to a broker. Potentially you could borrow up to 70% of the house price.

You can get a commercial property mortgage if you’re buying space for trading reasons. Although the loan-to-value is significantly lower for this type of purchase.  

 

Step 4. Get a mortgage!  

Apply to a lender for a mortgage. To do this you will need an NIE number, proof of income, up to date tax records, details of any previous or current debt, copies of existing property deeds, and if relevant, details of any other assets or prenuptial agreements.

If your application is approved you will need to set up a bank account and transfer money for the bank’s property valuation.

Once the valuation report is shared, you may need to make adjustments. The official valuation may differ from the agreed purchase. This could be more or less but if it’s the latter you’ll need to cover the deficit yourself.

If there are no legal issues and you have the right amount of money transferred into your new bank account then you can book a completion date with the seller and public notary and do the paperwork required.

On completion day your lender will arrange payment for the house and pay the relevant taxes through the public office in the presence of a notary. Once all the finances have exchanged and contracts signed, you should get the deeds and the keys to your new home!

This whole process can take 6-8 weeks if everyone included has the legal rights, documents and finances to begin with. It’s worth noting that if you want to relocate to Spain for more than 183 days in the year, then you will need to pay residential taxes, which include capital gains tax, investment tax and wealth taxes. There is further information on the legal process of buying property in Spain on the Spanish Mortgage Association website, it’s also worth checking with your countries foreign office for country-specific information (the UK, EU and USA offer advice in the English language) or you can read our Spain Buying Guide for further insight.

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