Buying Guide – Spain

Lending criteria

Mortgages are available in GBP, USD, Euro, Yen, CHF, AUD, NZD, CAD, HKD or SGD and will be secured against Spanish residential property in mainland Spain, the Canaries and the Balearics.  Spanish mortgages will require full disclosure of income, outgoings and savings.

The maximum loan to value currently available is 70% of the purchase price, or valuation, whichever is the lower.

Spanish lenders assess eligibility on the applicant's capacity to repay the mortgage, as well as recent credit history.  As a guideline, your debt to income ratio should not exceed 35% of your gross monthly income; however there may be a degree of flexibility in this for certain types of applicant.  Mortgage, rent, personal loans and maintenance commitments are all considered as outgoings. 

To find out how much you can borrow and for a formal decision in principle, click on Apply Now.

Types of mortgage

Mortgages can be obtained for the purchase of new or existing properties, as well as refinance/remortgage. The property must be registered at the land registry as a habitable civil dwelling.  Please note that the criteria for ‘habitable’ are set by the local authorities and unless the property has been granted this certificate, mortgage finance cannot be obtained.  

Renovation and construction loans are available, however estimates will be required at the time of application, and clients must have obtained all the necessary authorisations. Once the mortgage has been approved, funds will be released by the lender directly to your builders following submission of invoices.  The property must be classified as ‘habitable’ before a lender will consider an application for a renovation loan.  In the case of construction loans, more detailed information on the project will be required, so please contact us.

Mortgage products

A variety of products are available. Both interest-only and repayment mortgages can be arranged, on a variable or fixed-rate basis, or a combination of both. Terms can be from 5 to 25 years; however loans must usually be repaid by the age of 70, although there may be exceptions to this in certain circumstances.  Many of our products do not have any early redemption penalties.   For an idea of the rates available please contact us, or for a personalised quotation by clicking on Apply Now.

Documentation you will be required to provide

• Proof of identity (passports, driving licence, or other suitable photo ID.)

• Proof of residence (utility bill, bank statement etc. dated within the last 3 months)

• Proof of income (latest payslip, tax return, copy of accounts etc.)

• Proof of existing mortgage or rent payments (usually covering the last 12 months)

• Proof of deposit (last 60 days bank statements showing source of funds)

• Bank statements (usually last 60 days to show salary credits and outgoings)

• Property details (copy of sales particulars, or sales contract)

Documents will need to be either original or certified copies. Items such as passports and driving licences will need to be in date at the time the mortgage is due to complete or close.

Timeframe

We will issue a decision in principle within 48 hours of receiving a fully completed application. 

The processing time from the application being received by the lender to completion or closing is approximately 6 weeks.

Life assurance

Life assurance is not compulsory in Spain.  However if you would like to receive a quotation for life cover please contact us and we will recommend a provider to organise an illustration for you.

Buildings insurance

This is a compulsory part of the mortgage process, and can normally be taken through the lender or via an approved third party insurance company. This will need to be in place for when the mortgage completes or closes 

Bank account

You will need to open a Spanish bank account before completion, from which your mortgage repayments will be debited. This can also be used for utility bills, taxes etc. We can assist you in opening an account.

Payment of your Spanish mortgage

Please be aware that missing a mortgage payment in Spain may have serious consequences and we therefore strongly advise you arrange for monthly debits from your local bank account. A number of foreign exchange providers offer a renewable 12 month regular payment plan. The exchange rate is fixed at the start of the plan, and the agreed amount will be debited from your local account and sent to your Spanish account each month. This service gives you peace of mind in the knowledge that your mortgage repayments will be met automatically each month. Please contact us to recommend a provider if this is of interest.

Transferring funds to Spain

Whilst purchasing your Spanish property it is also likely that you will need to transfer funds to Spain, to pay a reservation fee, a deposit on the property, or to cover additional purchase costs. Making payments in a foreign currency will mean you are exposed to movements in exchange rates. This is likely to affect the final cost of the property you are buying, as will the exchange rate you receive when you make the transfer. Through our carefully selected foreign exchange provider we are able to not only save money on the exchange rate you receive but reduce your exposure to exchange rate movement.

For further information on how these services can benefit you please contact us and we will be able to answer any questions you may have.

Completion

You do not have to be present at completion and can give Power of Attorney if necessary. Your lawyer will be able to discuss this with you in more detail.

Costs of setting up a Spanish mortgage

In general terms if you are purchasing without a mortgage you will need to pay 10% of the purchase price in taxed charges and fees. If you are buying with a mortgage you will need to pay up to 12%. The fees are listed below:

Taxes - For new properties VAT of 7% and stamp duty of 0.5% to 1.0% is payable on completion. For second hand properties a transfer tax of 6 – 7% (Impuesto de Transmisiones Patrimoniales or ITP) is payable on completion along with a municipal tax called "Plusvalía municipal".

Notary fees – If a Spanish property has a mortgage secured against it this has to be declared before a Notary. Notary fees are based on the number of clauses in the deeds and a mortgage deed will have approximately the same number of clauses as a purchase deed. The notary will charge for this and therefore a Spanish mortgage increases the Notary costs at the time of signing the public deeds of sale.

Deed Arrangement Fee - This is a fee payable to the company (gestoria) who arrange for the deeds to be inscribed correctly in the local land registry. Lenders will normally insist on using their chosen gestoria as they need to be absolutely sure that both the property and the mortgage have been properly registered. This should not be more than a couple of hundred Euros

Mortgage set up fee - 1% - 1.5%

Valuation fee – will vary depending upon the purchase price

Lawyer fee – typically 1% of the purchase price

Arrangement fee - depending on the Mortgage Provider, between 0.5% and 2%

Mortgage Subrogation Fee - If a Spanish property that has a mortgage secured against it is sold the mortgage can be either cancelled or taken over by the new owner (known as subrogation). The subrogation fee is usually paid by the new owner and is typically lower than an opening fee for a new mortgage (0.5% instead of 1%). If you are offered the possibility of subrogating a Spanish mortgage it is important to bear in mind several factors. Firstly, subrogating Spanish mortgage means continuing with the existing mortgage (that means the same conditions i.e. period and interest rate). In doing so you might not be taking over the best terms available to you in the Spanish mortgage market. On the other hand all of the set up costs; Notary, land registry and taxes, are lower.

Buildings insurance – There are three types of insurance to consider when arranging a Spanish mortgage. The first is general house and contents insurance. This is a legal requirement of Spanish mortgages and the lender must appear as the beneficiary of the house insurance. The amount of insurance required will be established by the valuation, and the insurance value will not be the same as the value of the property. The insurance value is the amount required to rebuild the property, clearly that will not include the value of the land as that would still exist. The other two types of insurance are life insurance and mortgage insurance. In both these cases insurance is not mandatory (as it is for house/building insurance), however it is worth considering them as not only is it important to have appropriate insurance cover but it will also help when negotiating better conditions for your Spanish mortgage. The costs of the insurance are based on your age and the loan amount and can vary from bank to bank.

We charge a non-refundable application fee of £150.00.  A further fee may be payable on completion of the mortgage.  Please refer to your personalised quotation for confirmation.

We recommend that you seek professional, legal & tax advice before purchasing in Spain

Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it. Be sure that you can afford the repayments before entering into any credit agreement. Any quotation supplied is not an offer of mortgage and may be subject to a change without notice. Exchange rate movements may increase the Sterling or home currency equivalent of your liability under a foreign currency mortgage.