How to get a mortgage in Spain: A simple guide

Affordable property prices and comfortable year-round temperatures attract many expats wishing to buy property. However, getting a mortgage in Spain can be a confusing and infuriating process. Here, we try to clear up how the process works, to save you time and energy!

Mortgage requirements

First of all, you do not need to be a Spanish citizen or resident to get a mortgage in Spain. However, you will need to have a NIE number (foreigner’s tax number). Though you don’t need to be a resident to get a Spanish mortgage, residents receive preferential treatment in terms of interest rates and borrowing capacities.

There are no age restrictions in mortgage applications, but lenders may impose their own restrictions.

Though it is possible to get your Spanish mortgage alone, much of the process is in Spanish and concerns Spanish law, so some buyers may opt to have a legal representative or broker to help. A list of English speaking lawyers operating in Spain is available on the British Government website, broken down by region and speciality: https://www.gov.uk/government/publications/spain-list-of-lawyers

Choosing a bank

Your residency status will affect how much you can borrow from a Spanish bank. Residents are generally permitted to borrow up to 80% of a property’s value (LTV), while non-residents can only borrow 50-70% LTV.

Most larger Spanish banks including Caixabank and Santander offer mortgages to non-residents. Buyers can also use international banks, but may incur more costs.

Mortgage types

There are several types of mortgage available in Spain.

The most popular is a variable rate interest, where interest currently sits at around 2.25% . Buyers do not know monthly payment costs far in advance but interest rates usually remain below that on fixed rate interest plans.

Fixed rate interest have higher monthly repayment fees at around 2.8%, but are sometimes favoured for their stability for buyers who know their monthly fees in advance.

Many non-resident buyers opt for non-euro mortgages which can minimise losses in currency exchange. However, it is worth noting that experts advise taking out mortgages in euros, particularly if the property is ever used for tourism purposes.

Interest-only mortgages are uncommon in Spain and are only available to residents. They offer lower monthly payments but cost more long-term.

Green mortgages are increasingly being offered. In these cases, a buyer can receive benefits including lower interest rates on properties that have high energy ratings, typically above ‘A’ or ‘A+’.

Interest rates

Interest rates for residents are also generally much lower at around 1.5%, compared to 2-2.5% for non-residents. Furthermore, non-resident mortgages have a term of less than 20 years and are usually fixed rate. Residents can access mortgages of 40 years.

Documents required

All set? You will need the following documents to apply for a mortgage in Spain:

1. NIE number (Foreigner’s tax number)
2. Proof of employment and income
3. Details of current debts and mortgages
4. Record of current property deeds and assets
5. Signed pre-agreement with property seller
6. Proof of current tax payments

Fees

Often cited as the biggest downside to a Spanish mortgage, mortgage fees can be quite high. However, increasingly these are not always paid solely by the buyer. Buyers can usually negotiate some of the fees with the bank.

The buyer must pay a valuation fee for the bank to accept the mortgage application. A mortgage fee of around 0.5%- 2% is then paid to the bank by the buyer, however this may change due to European Courts ruling it unlawful. Next the buyer must pay a fee similar to Stamp Duty in the UK, this is worth 1.5% of the property in Costa del Sol. Buyers must also pay for any insurance policies required for the mortgage. Buyers can opt to take on a seller’s mortgage through a subrogation fee of around 0.5% of the mortgage’s value.

Notary fees and a land registration is often paid by the buyer in full or partially by the bank. Additional accountancy costs from a ‘gestoría’ are sometimes paid by the buyer and sometimes by the bank, if they have an internal department.

After applying

After you submit your application to a bank, they will offer you a mortgage. You are welcome to negotiate the mortgage if it is not to your satisfaction, or take it to a competitor.

If you complete the above steps, you will be all set to enjoy your new Spanish property!