Remortgages in Spain Are Different to Other Countries

Remortgaging to switch lenders or release equity — standard practice in many countries — is normally not possible, or not cost-effective, in Spain. IMS has been placing mortgages in Spain since 2002, and can explain the pitfalls before they cost you time and money, rather than after.

Buying Out an Existing Owner With a Spanish Mortgage

If a property is owned jointly, it may be necessary to buy out the other party — for example, in the case of divorce or the incapacity of the other owner. If you own a property jointly with someone else and want to buy them out with a mortgage in Spain, some level of funding is possible.

  • You can generally be offered up to 70% of the buyout cost, so you’ll need to find the remaining 30%, plus transfer costs, yourself
  • Removing a second person from the purchase deed isn’t as simple as in other countries — you’ll pay transfer tax on the amount you’re paying to take over 100% ownership
  • If the property doesn’t already have a loan, Spanish banks may offer a mortgage at 70% of cost to help you take over the property
  • If a mortgage is already jointly held, a new lender is less likely to remortgage the property. In this case, it’s best to talk to the existing lender rather than looking for a new bank
  • There are no set products — each application is reviewed on its own merit

In the case of divorce, where there’s a court order in your country of residency, banks may consider a remortgage in Spain to provide new funds that meet the court order.

What Are the Potential Drawbacks of a Remortgage in Spain?

Remortgaging in Spain does not form part of the active lending market. In other countries, considering a remortgage during the life of a loan is normal — in Spain, it’s not. Many restrictions apply, and few lenders offer the facility.

  • Remortgaging, with or without raising extra cash, is rarely cost-effective in Spain
  • The cost of doing so often outweighs any benefit on rate
  • Because of rising funding costs for Spanish banks, margins on new mortgages are often higher than the margins on mortgages set up previously

This is largely a legacy of how the Spanish mortgage market developed. Unlike the UK, where remortgaging every few years to chase a better rate is standard practice, Spanish banks have never built their business models around actively competing for existing borrowers. There’s little commercial incentive for a bank to make it easy or cheap for you to leave one lender for another.

Because of this, a genuinely better rate elsewhere rarely justifies the cost and effort of remortgaging on its own. Before assuming a remortgage is your best option, it’s worth checking whether a novation — a change to your existing mortgage’s rate or term, without a new deed — could achieve a similar result more cheaply. Contact us to talk through whether either option makes sense for your situation.

When Can I Take Out Extra Funds in Spain?

You can only raise funds from your property in Spain in very limited circumstances. Money laundering restrictions from the Bank of Spain make it difficult to take funds out of the country.

  • It’s currently very difficult to refinance a mortgage in Spain to raise extra funds
  • Normally, Spanish banks only offer this facility for home improvements, or to buy another property in Spain
  • Two lenders are the exception: if you completed your purchase in cash within the last 6 months, they’ll allow you to take funds back out of the country
  • Outside of this, banks currently have little appetite for any type of remortgage on non-resident loans
  • In other specific circumstances, something may be possible for individual clients — but even then, moving the funds outside Spain generally won’t be possible
  • If you own a property outright with no existing liens, you may be able to raise finance against it for improvements. If a mortgage is already secured on the property, your only option is to ask your existing lender for a further advance

Some bridging or short-term equity release exists, but only through non-regulated providers

To check whether a remortgage could work for your situation, email us today info@imsmortgages.com

Remortgages in Spain

What Is the Process for Remortgages in Spain?

If you’re considering moving your Spanish mortgage to another Spanish bank, it’s important to understand your options — legislation dictates how this can be done. You can move your mortgage in two ways.

The first is subrogation: moving your existing Spanish mortgage to a new lender.

  • You can subrogate or transfer an existing loan to a new lender
  • Not all lenders offer subrogation, but where they do, they must follow the procedure set out in 2019 government legislation
  • Subrogation used to significantly reduce the cost of moving, by avoiding mortgage deed tax in some circumstances
  • Since the 2019 regulation changed the rules, subrogation costs have reduced — where a bank offers it, only the arrangement fee, and valuation fee now apply

The second option is to set up a completely new Spanish mortgage, with a new deed, through a new lender. This is a straightforward closure of one loan and the start of another.

Whichever route you take, it’s worth comparing the full cost and process against simply asking your existing lender for better terms first.

Calculating Spanish mortgage costs

What Costs Apply for Remortgages in Spain?

Because Spanish banks aren’t active in the remortgage market, there are no fee-free options. You’ll need to cover any set-up or valuation costs yourself.

  • A valuation fee for the new lender
  • A bank arrangement fee, typically between 1% and 1.5%
  • Broker fees, if you use one
  • Any early repayment penalties due to your existing lender

New lenders don’t cover or contribute to these costs, so budget for the full amount from your own funds.

Taken together, these costs mean a remortgage to a new lender typically only makes financial sense if the rate improvement is significant enough to outweigh them. It’s worth calculating the total cost against the likely saving over the remaining term before committing.

We can help you work through this calculation for your specific situation, including checking your existing lender’s early repayment terms before you commit to moving. In some cases, a conversation with your current bank about a rate reduction may achieve a similar result without the cost of a full remortgage.