Spanish Purchase Mortgages

Spanish mortgages for purchase of a property in Spain. Before considering buying in Spain, it is advisable to ensure you are well informed on how the non resident mortgage market works in Spain. Also how they are regulated.

Buying real estate in Spain

The buying process in Spain will be safer and more secure, if you have your finances in place. At IMS we offer all our clients a no cost and no obligation fully underwritten financial approval. For a mortgage in Spain.

• Know your maximum borrowing capacity, for a mortgage in Spain
• Have your Spanish mortgage pre approved so you can negotiate with sellers from a position of strength
• Feel safe to move quickly to make an offer, without risk 
• Contact us today for guidance on how to obtain a full pre-approval for a Mortgage in Spain

Why should I obtain independent information, when arranging a Mortgage in Spain

Many Spanish Banks do not have published criteria’s and products. Branch Mangers can often define rates and costs for the Spanish Mortgages, within certain guidelines.  If you apply direct you cannot be certain you are being offered the most cost effective terms and conditions. As an independent broker, we will use our knowledge and experience to negotiate on your behalf. Ensuring you have access to the best possible terms and conditions for your Spanish mortgage.

• We provide you with free advice and guidance
• In addition, no obligation fiscal approvals in principle for Spanish Mortgages
• We help you ascertain what your maximum budget will be
• Also what cash deposits you will require
• Finally, how much the entire purchase and Spanish mortgage process will cost, with no nasty surprises or misunderstandings at a later date

For independent and knowledgeable advice, contact our advisors today

Regulation of 2019 has impacted on timescales for Spanish Mortgages

New Regulation was implemented in June 2019. The changes extended the time it takes to organize a loan in Spain. Signing of the mortgage in Spain offer must happen at least 10 days before completion. Also registration of the offer at a central notary office.

• Undertaking the Spanish mortgage process before you commit to a property is important
• Non refundable deposits are paid at point of contract
• We can guide and support you through the entire process, and make sure your deposit monies are protected
• Experienced advisers will explain everything you need to know, in a clear and concise manner
• You will be appointed a regulated mortgage professional to undertake your Spanish mortgage application

For more information on Spanish mortgage applications Contact us today »

Loan to values, for non residents applying for Spanish mortgages

All Spanish Banks have loan to value restrictions. Spanish mortgages are granted as a percentage of valuation or purchase price. However, the lower of the two.

• Maximum loan to values for non resident mortgages in Spain are 70%.
• Some lenders limit this to 60% for non tax residents of Spain.
• Also applicants living outside the EU.
• Loan to values for Rustica property might be lower
• Larger loans above 500k may have loan to value limitations.
• Costs of purchase cannot be added to loan, if your loan to value has been maximized.

Need to understand more about loan to values. Ask us your question now.

Term you can expect for a mortgage in Spain

Most Spanish Banks can offer a range of years. The number of years offered can be affected by the affordability ratios the lender works to.

• Maximum terms for a Spanish Mortgages range from between 20 to 30 years
• Age restrictions apply. Maximum age for a mortgage in Spain, can vary from Bank to Bank. Ranging from age 60 to age 75 years
• Spanish Banks prefer non resident loans are for a maximum of 20 years

To better understand what product is right for you, speak with one of our experienced advisers. Request a call back today.

Types of loans available in Spain

Spanish Bank only offer a limited amount of product types, for a mortgage in Spain. These include variable rate trackers. Fixed rates for the full term, and mixed rates. Access to self build and commercial lending is very limited. Standard repayment loans are the main product in Spain. Interest only has disappeared from the market. This loss of interest only facilities happened under pressure from the Bank of Spain.

• Fixed rate loan Spanish mortgages are available. Now offered by nearly all Banks in Spain they have become increasingly, more widely available
• Access to a Spanish mortgage can be affected by the currency of your earnings. To find out more contact us
• Variable rates can provide more medium term flexibility
• Fixed rate Mortgages in Spain are for the full term, and available at competitive rates
• Fixed rates will provide long term stability
• Most fixed rate loans have higher early redemption penalties than the variable rate products
• A couple of lenders offer mixed rate products. Shorter term fixes. Moving to variable at end of fixed rate term
• Buy to let mortgages, using rental income as part of the affordability assessment, are not available. However the Banks in Spain do not prevent you from renting the property out
• Most loans are for purchases only, a small handful of banks allow, or can offer, remortgages or equity release. Where they are offered many restrictions apply
• Loans for self builds are limited. Up to 70% of build costs. One lender up to 70% of total cost. In addition the land must be owned outright
• Spanish loans for the purpose of buying land in Spain is not possible

How Spanish Banks assess affordability ratios for a Spanish mortgage

Spanish Banks assess affordability very differently to other countries. The main criteria is monthly affordability. However some lenders will also assess total capital owed. Spanish Banks never work from gross incomes. At IMS we understand how each bank assesses an application. Therefore will save you time and money, by focusing on the right lenders for your circumstance.

• Spanish Banks work off affordability ratios based on net not gross income
• Incomes must appear on personal tax returns
• Very few Spanish Banks will consider net company profits not personally drawn. In addition not all Banks will consider the full dividends taken by self employed
• Treatment of existing buy to let mortgages and rental incomes varies considerably from Bank to Bank. A few Spanish Banks will not lend to individuals with more than one investment property
• Calculation of the debt outgoing, versus rent received, can sometimes make it difficult for buy to let landlords to meet affordability ratios
• Most Banks will consider 100% of after tax net income but a few limit this to 80%
• Some lenders apply minimum earning levels
• On average to comply with the general criteria for gaining a mortgage in Spain ,your monthly outgoings on loan and debt payments, including the new loan, will need to be less than 35% of your net income
• Asset wealth in isolation is not considered by the Banks in Spain

Complete our online form for your personal assessment of lending viability

Interest Rate levels for Spanish non resident mortgages

Spanish Banks generally adapt their rate offering to each client. Taking into account overall quality of the application. For instance affordability ratios, also maximum loan to value required. A well prepared application, submitted by an experienced processor, will ensure your application is viewed in the most positive manner.

• Variable rates are trackers based on a margin above the 12 month Euribor
• The margin above Euribor differs between Banks
• To gain the lowest rate, linked products may be required
• Spanish Banks can link compulsory products to the rate offered. Therefore all elements must be considered when looking at headline rates
• However Lenders must also offer you the option of a rate, without linked products
• Variable rate loans are reviewed against the Euribor at the review date. This will normally be 6 or 12 monthly Check our best buy tables today
• Fixed rates are fixed for the full term. Rates are offered based on term of the mortgage

Early repayment penalties for a mortgage in Spain

By law from June 2019 early repayment penalties cannot exceed 0.25% for the first 3 years. Or the option to have a penalty of 0.15% for 5 years. After this period the penalty is 0%. The rule applies for partial and full overpayment for variable rate products.

• Penalties are a percentage of what you overpay. Not the original capital taken
• For fixed rates the maximum redemption penalty increases to 2% for the first 10 years and 1.5% thereafter
• Spanish Banks have to make an interest rate loss for the extra penalty to apply
• Fixed rate penalties are a percentage of the rate loss, or capital overpaid. But the lower of the two
• Early repayment penalties are open to negotiation for partial overpayments. Some lenders have lower penalties than the law dictates. Also some have no early payment penalties at all

Costs of completing on a Spanish Mortgage

The costs associated with a mortgage in Spain have reduced significantly since 2019. Spanish lenders can no longer pass on the cost of mortgage deed tax. Nor the costs of Notary and land registry, relating to loan deed.

• Spanish Banks charge a fee known as the Bank opening, or Bank arrangement fee. This fee is taken from the gross loan amount at completion
• Fees for Banks in Spain normally range from 1% to 2% of loan amount
• Other fees associated with a loan in Spain include the valuation fee. Payable at instruction of valuation
• Valuation fees average 0.10% of value, with a minimum fee of around 300 euros

Contact us today if you would like further information on buying and loan costs.

AHE Spanish Mortgage Guide »

Spanish Land classifications and other possible loan restrictions

Spain has two types of land classifications. Urbana and Rustica. It is important to understand the classification of land a property sits on. Land classification can affect lending available. Other loan restrictions can apply for self builds, off plan purchases, and reforms

• All Spanish Banks will lend against residential property on Urbana land
• Very few banks will lend on property registered as Rustica, or any other classification. If they do it will normally be at lower loan to values
• When applying for a loan it is best to check the Nota Simple of any potential property, early on in the process, to understand the land status
• Very few Spanish Banks currently offer either construction loans, or loans for large reforms. Where they do loan to value restrictions will apply
• Also rates are likely to be higher

Before committing yourself, check with us what type of purchase you are making, and how that might affect borrowings. Contact us today

Home buyer valuations for a Spanish Loan

Spanish lenders have a panel of Bank of Spain authorized evaluation companies. They have a preference you use a company from their panel, but cannot insist you do so. Costs of a bank instructed valuation, due to volume of business, may be cheaper with a lender than you can achieve direct.

• Formal Valuations can only account for meters registered at Land Registry
• Overbuilds or extensions not registered will not be taken into account. Therefore changes to the property, not updated at land registry, will not be valued for mortgage purposes
• Lenders prefer to use their appointed valuation company
• Under the 2019 legislation you can instruct an independent valuation. As long as the company is registered by Bank of Spain. Also that the report is designated for the purpose of a mortgage
• Standard Bank valuations are like home buyer reports. However they are not a structural valuations
• Valuations instructed by a Spanish Bank, do not indemnify the buyer against future structural problems
• Very few valuation companies offer structural valuations with full indemnity. If you require this service we can help organize one

Spanish Mortgage deeds

All Mortgage Loans in Spain are signed for at Notary, on a separate deed to the purchase deed. Both deeds will be in Spanish, therefore, the Notary will require a person fluent in Spanish attends. It is possible to appoint a lawyer to sign on your behalf under a specific POA

• In the absence of a consumer credit act, loans are written into a legally binding deed. This is signed by all parties at completion
• It is not possible to change the terms within the deed after signing. You are bound by the terms under law
• Mortgage deeds signed under POA require specific wording, to allow for the whole transaction to be undertaken
• Changes to the deed, beyond an agreed reduction in rate, movement to a fixed rate, or extension of term, requires a new deed. In this instance some Mortgage costs will apply again
• Novacions, so changes that can be made without a new deed, will hold a maximum cost of 0.15% first 3 years, and no cost thereafter

Subrogation for Mortgages in Spain

Subrogation of a loan in Spain means a buyer takes over the existing mortgage deed. You cannot port and existing mortgage to a new property. All loans in Spain are linked to the property not the individual.

• In Spain it is possible to take over or subrogate an existing loan held against the property. Due to preferential terms on historic loans, many Banks have stopped offering this facility. However the option can be explored. In order to see if a suitable loan exists against the property you are buying
• Firstly you need to understand the terms and conditions of the existing loan
• What capital is outstanding
• Would the current banks consider subrogation
• The key benefit of subrogation used to be it avoided having to pay mortgage deed tax.  With all Banks now picking up this cost, subrogation is less beneficial

Contact us today for more information on how Spanish Mortgages work »