Mortgages in Spain
In the context of mortgages, the Spanish market currently lags behind in terms of the range of lending products available and restrictions on the Loan To Valuation (LTV) and document processing. The mortgage market in the UK is regarded by many as the most advanced market of lending in the world, with applications processed with some level of ease. Having said that, Spain is ever evolving both in terms of the increasing number of financial institutions, (including well known international lenders) and in the products these new institutions are introducing to this competitive market.
Frequently asked questions
There are two main determining factors, the property value and your income.
Property Value: As a general rule, Spanish residents can borrow up to 80% of the property value and non-residents up to 70%, though sometimes less for higher priced properties. In some circumstances this can be 95% and 80% respectively. Note that the valuation and the purchase price can differ widely.
Income: Again, as a general rule, Spanish banks will accept that up to 35% of your net income will be used to repay borrowing. Borrowing may include your domestic mortgage if the purchase is a holiday home, and other loan commitments. It is a family purchase then multiple incomes can be used.
So have we, but they are usually marketing ploys. 100% mortgages in Spain do not exist except in exceptional cases for residents and usually involve third party guarantees. However, 100% finance can be arranged but that is a different thing. If you already own one ore more properties in Spain with little or no mortgage outstanding then this can often be arranged. (Also see question 4.)
Spanish mortgages traditionally are from 5 to 15 years and should be completed by the age of 65 or 70. However, things are starting to relax more in Spain and terms of up to 30 years are now obtainable.
There is no absolute maximum to the number of applicants. For example if you are in, say, your late 50s but would like a 25 year mortgage, it is possible to add one or more of your children or other family members to the mortgage, and the mortgage term can be based on the younger age.
Probably not. Valuation methods in Spain can differ from other countries and guidelines to valuers are issued by the authorities, sometimes with suggestions they should down-value to avoid overheating of property price rises.
Sometimes for mortgage purposes, the value can be as simple as the square metreage of the property, multiplied by a figure per square metre determined by recent local sales. Views, conditions, specific location and other aspects may be ignored.
Whilst it is not unusual for a property to only value at 80% of the asking price, it is also know for a valuation to be over 150% of the purchase price. Your maximum mortgage amount is based on the value.
Spanish banks appear to be lovers of every piece of paper available, but remember, they are only trying to protect the interests of their depositors. Most of the papers required will be readily at hand to a reasonably organised person, or at least readily available.
Bank statements, tax returns, pay-slips, employers reference, bank reference, accounts if self-employed, copy of passports, proof of purchase deposit, mortgage or rent receipts are typical.
Lenders will typically charge an opening fee of 0.75% to 2.0% of the approved loan. Interest rates vary between lenders and special offers are sometimes available. Most banks charge a penalty for early or partial repayment, typically 1%. A mortgage broker can often negotiate special deals and terms in view of the large number of applications they place with the lender.
It certainly can be for tax purposes. As a general rule the initial and ongoing costs of this route make it only worthwhile if the equity in the property or properties exceeds one million euros. Of you wish to pursue this route, contact your mortgage broker or solicitor for further details.
Only Spanish institutions and Spanish subsidiaries of foreign companies can securitize a loan on Spanish properties.
Quite possible but not often advisable, other than for raising enough to top up a maximum mortgage available here. It is not generally advisable to have an asset in one currency and the loan to purchase it in another. Exchange rate and property price fluctuations make this an additional risk.
In addition, and most important, interest rates in Spain are generally lower than elsewhere. If it is your personal preference, for whatever reason, the mortgage can be arranged in any major currence.
It is common, though technically illegal, on a resale property to have a low declared value. Typically, say the selling price is 250,000 euros, then the vendor may request the transfer to show 180,000 euros with the remaining 70,000 euros being paid in cash. Black money. Although illegal it is commonplace, but you must consult your solicitor before agreeing.
The good news is that you save a lot of money. The typically quoted 10% buying costs are based on the lower value. However, if not careful you could be in line for a fine if discovered, and when you come to sell the property you could be liable for a hefty capital gains tax bill. The practice is generally acceptable, but the mortgage cannot usually exceed the low declared value.