Buying a property in Spain - How to get a mortgage for a Spanish property

If you have recently become a citizen of Spain and are looking to make Spain your permanent home, you are possibly intending to purchase a property. Buying a property in Spain can be an exciting and life-changing experience. Knowing what the procedure are, what fees to expect and the steps you will need to take can make the process much more straightforward.

In this guide, we explain the process of buying a property in Spain, exploring the types of mortgage available in Spain, the term you can expect and how much you are likely to be able to borrow. We also answer frequently asked questions about obtaining a Spanish mortgage and the importance of seeking legal representation.

Click on a link to jump to that section:

• Types of mortgages available in Spain
• How much could you borrow for a mortgage in Spain?
• The term you can expect for a mortgage in Spain
• Interest rates
• Qualifying for a Spanish mortgage
• Getting insurance
• Getting advice from English speaking Spanish property solicitors
• Frequently asked questions

Types of mortgages available in Spain

In Spain, there are three types of mortgages available from mortgage brokers regarding residential mortgages - these are for residents of Spain who wish to purchase property which they intend to live in. There are also commercial mortgages, which are mortgages for those who wish to purchase property as a base for their business.

Finally, you will find buy to let mortgages, which are for those who are looking to buy a property in order to let it out to other people such as holidaymakers.

How much could you borrow for a mortgage in Spain?

Residents can generally borrow up to 80% of the property's assessed value. Non-residents are limited to 60–70% LTV, depending on the mortgage type.

Some Spanish mortgages have no restrictions on residential status or nationality when buying property, and it may be possible to get a mortgage of up to 100% when purchasing a property which has previously been repossessed by the bank (as seen here).

The term you can expect for a mortgage in Spain

The maximum term for a Spanish mortgage is between twenty and thirty years. Where possible, banks will tend to err on the side of the maximum being twenty years. Some age limits do apply, depending on the bank - for example, the upper age limit for someone applying for a mortgage could be between sixty and seventy-five years of age.

Interest rates

It is important to note that a Spanish mortgage lender will look to the annual Euribor (European inter-bank offered rate) to establish their rates and then add their own small margin on top of this - usually amounts to around between 1.5% and 3.5% over the Euribor rate.

Fixed rates vs variable rates

A fixed rate mortgage means that you pay the same amount of your mortgage, year on year. This is because the interest rate is fixed, and so you will not suddenly find yourself having to pay a dramatically increased rate due to a general rise in interest rates. However, this may result in paying more interest than you otherwise would have, due to changing market trends causing natural fluctuations.

With variable interest rates, your mortgage repayments will fluctuate based on changing interest rates, so you may find yourself paying differing amounts. This can be beneficial, as you may be able to pay your mortgage off sooner than expected or enjoy paying less some years.

Which type of mortgage you choose really depends on your financial status - if you would rather have the stability of a fixed rate and do not mind the potential of paying more overall, then a fixed-rate mortgage would be suitable for you. However, if your finances are a little less rigidly structured, a variable interest rate could be of great benefit.

Qualifying for a Spanish mortgage

When applying for a mortgage in Spain, your current financial status will be taken into consideration. This is because it is important that you can show that you have the means to pay back the mortgage reliably.

Finally, the loan to value is considered. This means that they will take your age, resident status and the property value into consideration when deciding which loan is appropriate to offer you.

When purchasing a property in Spain, you will notice a key difference between buying property here and in the UK - this relates to the holding deposit. In Spain, you will pay a non-refundable holding deposit of between 3000-6000 Euros which counts as a reservation fee on the property - another buyer cannot make a higher offer. However, in the UK, you will only pay a nominal deposit and the property can still be marketed.

What documentation is required to obtain a Spanish mortgage?

When applying for a Spanish mortgage, you will be expected to provide the following documents as proof of employment or your income - this can be in the form of your payslips, together with your contract of employment. You will also need the pre-agreement with the seller, which should be obtainable through your legal representative, and proof that the property does not have outstanding tax due, this can be obtained through the sellers the property.

You will need to provide proof and details of your own ongoing financial liabilities and any existing mortgages, including any property deeds you have, regardless of whether these are in Spain or anywhere else in the world. Records of any other assets you currently have will also be required. If you are married, you may have a prenuptial agreement which will need to be shown.

Finally, you are required to show your NIE (Número de Identificación de Extranjero) number, which should be obtained from the Administración General del Estado (General Administration of the State) by all foreigners who wish to stay in Spain for longer than three months.

Insurance (life, building, home)

Obtaining insurance for life and home and building insurance is vitally important in Spain and is compulsory when buying a property. Often, the bank you obtain your mortgage from will also provide you with life and home insurance.

Getting advice from English Speaking Spanish Property Solicitors

As with any legal transaction it is important to instruct a lawyer when buying a property in Spain. An English/Spanish speaking lawyer can help you translate legal documentation, and can assist with explain the difference between the UK and the Spanish property system. Giambrone’s Spanish real estate team can provide you with all the support you may require, whether you are moving from the UK or elsewhere.

Frequently asked questions

Can you buy a Spanish property with a UK mortgage?

You cannot use a UK mortgage for Spanish property.

Do you need a Spanish bank account to buy a property?

It is prudent to open a Spanish bank account to purchase property in Spain.

How much tax do you pay when buying a house in Spain?

This is dependent on the property itself and can range from 8-11.5%

What are your real estate investment returns in Spain?

This depends on the area, but roughly 4-5%.

How much does it cost to buy a house in Spain?

The overall cost of buying a house will depend on the valuation of the house itself. It is a good estimate to allow 10-15% of the purchase price to be set aside for fees.

Can you get a Spanish mortgage with bad credit?

This may be possible but will prove difficult, and more so for non-residents.

Is buying property abroad a good investment?

Buying property abroad is a good investment, as you can often let it out at a later date.

Is it better to buy or rent in Spain?

For those looking to remain in Spain long-term, buying a property will feel more secure and you enjoy developing your own home.

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