Mortgage in Spain
Be sure to get pre-approved for your mortgage in Spain before you start your property search
When the time comes to purchase your property in Spain there is a strong possibility that you may require a mortgage to purchase the ideal property if you see something just outside your cash budget.
If you are serious about purchasing the property in Spain and do require finance, then it is highly advisable that you should start to look into what finance options are available and even get your Spanish mortgage approved before you start seriously looking at making offers on properties.
This is because the application process takes time to arrange and forward planning at the start will also give you a better idea of how much you can spend on your Spanish property.
So if you have already been pre-approved and your mortgage proposal is in place in principal before your search starts then you are in a much better situation to make an offer when you find your dream property and it gives you buying power as the offer will be subject to the mortgage valuation which only takes a few days to arrange rather than the whole mortgage application process which can take up to 6 weeks. Many vendors will not wait this long. (I like this bit)
How much can I borrow?
The traditional mortgage offer for non-residents is 50-70% of the purchase price or valuation depending on the strength of the mortgage application.
The maximum lending for residents is 80%.
How much deposit do I need?
As a non-resident applying for a Spanish mortgage, you will generally need a minimum deposit of 50% of the property’s purchase price. This allows for 10% buying costs on top of the purchase price.
What type of mortgage do the Spanish banks offer?
With banks in Spain now adopting greater caution following the Spanish property crash, most lenders now only offer home loans on a repayment basis – including both interest and payment towards the capital loan amount
Although some lenders will allow the choice of either a fixed or a variable interest rate, most Spanish mortgages are currently available on a variable-rate basis, usually (but not always) with a maximum term of 25 years.
Mortgage payments can go up or down according to movements in interest rates usually as a set percentage, as opposed to a fixed-rate mortgage which guarantees your mortgage payment each month over a set period.
Can I pay my mortgage off early?
If your circumstances change and you want to pay off your mortgage early you will have to pay an early repayment charge But typically redemption penalties are low in Spain –Usually 0.25% in the first 3 years for full or partial redemption and 0% thereafter.
Do I need Life insurance?
It is worth noting that most lenders would like you to take home and life insurance with them and offer heavy discounts on the interest rate spread if you did take these out. A serious word of caution here as these types of additional products taken via the lender are nearly always much more expensive and always have a negative effect on the APR or annual percentage rate which is the true cost of the mortgage.
Can I buy a bank repossession with a mortgage already in place?
If you are planning to purchase a repossessed property from the bank then it is a totally different scenario, with some lenders willing to offer 100% loan-to-value (LTV) mortgages and more in a desperate bid to offload high levels of repossessed stock on their books.
How do the new mortgage in Spain laws that were brought in June 2019 affect me?
Now it is compulsory for the banks to assume the fees associated with taking out a mortgage.
You will, however, be responsible for paying for the bank valuation approx. 300-500 euros and the mortgage arrangement fee typically 1.5% of the purchase cost.
If you are from a non-euro country you can now arrange to repay the mortgage in your own currency at a set rate. (Details on request)
When taking on a mortgage in Spain 10 days before completion you will now have to sign at the notary to state that you understand all the conditions of the mortgage. (POA from your lawyer is possible if you are not in Spain)
What documents do I need to apply for a mortgage in Spain?
Proof of employment
Latest tax return form
Details of other loans or Mortgages
6 months bank statements
Credit check from the country where you reside E.g. United Kingdom Experian or Equifax.
How do I apply for a mortgage in Spain?
If you are about to start your search for a property in Spain or you have already found a property that you want to purchase and need a mortgage then get in touch with us now on the contact form below stating “Mortgage Info” and we will get the application underway. One of the expert mortgage consultants from Fluent finance Abroad will be in contact with you asap. https://www.fluentfinanceabroad.com/
If you would like to watch the other videos in the #Makethemovetospain series please view here: https://propertyinspaingroup.com/make-the-move-to-spain-the-property-in-spain-video-series/