Understanding how to get a Spanish mortgage is essential when purchasing your dream property in Spain. Whether you’re buying a holiday home, relocating, or investing, the process is an exciting but often daunting one. Let’s break down everything you need to know as you begin your journey to becoming a Spanish property owner.
Why get a mortgage in Spain?
Moving to Spain is an exciting decision, with some beautiful towns and cities to explore.
Whether you’re attracted to the warm Mediterranean climate, cultural charm, or investment potential, buying property in Spain often requires financing through a mortgage.
So why might foreign buyers benefit from getting a mortgage in Spain?
- Interest Rates: Spanish mortgages offer some competitive options, particularly for fixed-rate mortgages. Compared to much of Europe and the US, interest rates are typically lower.
- Flexible terms: As with most mortgage products, the terms on offer are very flexible and can be short term or up to 30/35 years. This means that mortgages are suitable for buyers at different points in their life, whether looking to relocate for work or retire to a beautiful Spanish town.
- Accessible to foreigners: Though some criteria differs, Spanish mortgages are fairly accessible for expats and foreign buyers.
What are the requirements to get a mortgage in Spain?
When exploring how to get a Spanish mortgage, understanding the difference in requirements is perhaps the most complex step.
Spanish banks assess mortgage applications based on several factors, including your income, residency status, and financial history.
Here’s a look at how requirements may vary for non-resident buyers.
Deposits or down payments
In many cases (though this will vary by credit profile), residents can borrow up to 80% of the property value. For non-residents this is often lower.
Expats and non-resident buyers will usually need between a 30 and 40% deposit to buy a property in Spain with the LTV (loan-to-value) often limited to around 70%.
Income requirements
For those relocating to Spain a proof of income is required. Evidencing this can mean collecting payslips, tax returns and employment contracts.
Most mortgage lenders will be looking at net income for affordability and your monthly mortgage payments should not exceed a third of your total income.
Credit profile
A good credit score whether from your home country or Spain is important for the approval process. Non-residents may need to source additional financial documents to evidence a good credit history.
Documents required for a Spanish mortgage
The documents needed for a Spanish mortgage will slightly vary for each product. Generally you will need to gather the below information:
- Identification - A passport or valid national ID will usually be required.
- Residency Status - NIE (Número de Identificación de Extranjero) for foreigners. You can apply for an NIE in person at an immigration office or at the Consular Office of your country of residence.
- Proof of Income - This may include payslips, bank statements or pension statements.
- Evidence of Employment - Some Spanish mortgages will require a letter from your employer.
- Cost/Affordability Details - To secure a Spanish mortgage you will need information about the property including its value. Mortgage calculators can be useful for exploring affordability and understanding monthly costs.
Need to better understand your requirements? Let us take a look at your case for you.
How to get a Spanish mortgage
Getting a mortgage in Spain isn’t too dissimilar to getting a mortgage in the UK or US.
Here’s how it works:
Research and compare lenders
Comparing different lenders is a useful first step. Each lender has unique requirements and terms so some may be more appropriate than others.
Some popular mortgage lenders in Spain include:
- Santander
- BBVA
- CaixaBank
- Sabadell
- ING
- EVO
- IberCaja
If you’re unsure, it’s important to speak to a broker. They will be able to advise you on the most suitable options for your case.
Get pre-approval
With Spanish properties in beautiful locations being in high demand, pre-approval can be an important step.
This will give you a clear idea of how much you can borrow and demonstrate your seriousness to sellers. This means you can act quickly when the right property becomes available.
Choose the right mortgage type
There are two main types of Spanish mortgage to consider. Fixed rate mortgages and variable rate mortgages. Some non-residents may initially be restricted to fixed rate options.
- Fixed-Rate Mortgages: This is where the interest rate remains constant throughout the loan term, providing payment stability. The current fixed mortgage rate in Spain sits between 2 and 4%.
- Variable-Rate Mortgages: Tied to the Euribor, these rates fluctuate, potentially lowering your payments during periods of low interest. Typically these are Euribor + a margin, for example Euribor + 1%.
Some banks also offer mixed mortgages, combining fixed and variable rates. Learn more about Spanish mortgage rates.
Submit your application
Once you’ve selected a lender, submit your mortgage application along with the required documents. The bank will review your financial situation and assess the property’s value before approving the loan. A pre-approval will usually speed up this process as long as circumstances haven’t changed.
Sign the mortgage agreement
After approval, you’ll sign the mortgage contract. Ensure you understand all terms, including repayment schedule, interest rates, and any associated fees.
Costs associated with getting a Spanish mortgage
It’s important to account for additional expenses when applying for a Spanish mortgage.
These may include:
- Notary Fees: Typically 0.1% - 0.5% of the purchase price.
- Property Valuation Fees: Around €300 - €600.
- Property Transfer Tax (ITP): For pre-owned properties. Usually between 6 and 11% depending on location and property purchase price.
- Stamp Duty: 1% - 1.5% of the purchase price depending on location.
- Bank Fees: Some banks charge an arrangement fee (around 1% of the loan).
- Legal Fees: If you need to hire a lawyer, their fees can range from €1,000 to €3,000+.
Conclusion
Understanding how to get a mortgage in Spain doesn’t have to be complicated.
By understanding the process, gathering the necessary documentation, and carefully comparing lenders, you can confidently finance your dream property.
Take the time to explore your options, and you’ll be well on your way to owning a home in one of Europe’s most beautiful destinations.
Get your case analysed and learn how you can make your property ownership dream a reality.
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