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MORTGAGES
Relocation or buy to let your Spanish property?
Spain is a great place to live & invest in property and there are many ways you can buy the perfect house.
Here’s our four steps to funding your property purchase
mortgages
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Whether you want a buy-to-let or you’re relocating overseas, Spain is a great place to invest in property and there are many ways you can go about purchasing the perfect house at the right price. For many, getting a mortgage from a Spanish lender is the quickest, cheapest and most reliable way to get the house you want.
step 1: how to get a mortgage
You will also need a Spanish bank account in order to pay your deposit so open one as soon as you can!
Make some important decisions about what kind of property you want and where you want to buy. Find your dream home on our property portal to then use our budget calculator to work out the kind of mortgage you’ll need and the amount you might have to borrow.
It’s advisable to begin your overseas real estate hunt at the same time as securing a mortgage offer. This is because it’s unusual for Spanish banks to sign off the risk of your loan (securing a mortgage in principal) without a specific property and it’s Nota Simple (a legal report from the Land Registry) in the application. It is possible to change the property and the corresponding Nota Simple during the mortgage application process.
step 2: calculate extra costs
Spanish banks will usually offer terms of up to 25 years. People in receipt of a pension may need a guarantor but can still get an offer up to the age of 75 years old. There is a debt-to-income calculation that assesses your ability to pay off the debt, this is usually 30-35% of your total income.
Taxes
There will be transfer and stamp duty taxes to pay on your property. These will depend on the price of the house.
Bank fees
You will need to pay various fees to your lender for opening an account, assessments and valuations. These tend to be fixed by the mortgage lender.
The combination of the tax and bank fees is usually around 10% of the property value.
step 3: choose a spanish mortgage product & provider
Spanish Mortgage Brokers are regulated so make sure your mortgage broker is fully licenced and registered by the Bank of Spain under LCCI 5/2019.
Make sure the Bank of Spain authorises the lender you choose. Banco Santander, Banco Bilbao Vizcaya Argentaria (BBVA), and Caixa Bank are the largest, but there are many more options.
Make sure the institution you choose has regional branches near your new residence, and check to see if they have in-house professionals trained to deal with your circumstances.
The amount you can borrow for a home-owner mortgage depends on whether you are a Spanish resident for tax purposes or not. People who pay their taxes outside Spain or buy-to-let buyers will be offered up to 60-70% of the purchase price based on their valuation, whereas for residents who pay Spanish taxes, the loan-to-value can be closer to 80%.
Off-plan home developers may oblige you to get a mortgage from their chosen bank. You can compare their rates with other providers but you may be contractually tied to this lender.
When buying an off-plan home from a developer. Consider the developer’s mortgage a good option, but you are in no way obliged to take the developer’s mortgage. There is also no guarantee that the developer’s bank will grant you access to the developer’s mortgage either, as the bank will have its own affordability criteria that must be met in each case.
A repossession may only be available to buy through the bank that owns it, but you could get up to 100% of the house price financed.
You can get a construction mortgage if you’re buying land for development, but as these are complicated it’s advisable to speak to a broker. Potentially you could borrow up to 70% of the house price.
You can get a commercial property mortgage if you’re buying space for trading reasons. Although the loan-to-value is significantly lower for this type of purchase.
“In our opinion, potential mortgage borrowers should always search for as many options as possible before they commit to any long-term mortgage/credit contract. We believe that finding a market-leading Spanish mortgage can be the difference between a great Spanish property investment or an average one.”
step 4: get a mortgage
Apply to a lender for a mortgage. To do this you will need, proof of income, up-to-date tax records, details of any previous or current debt, copies of existing property deeds, and if relevant, details of any other assets or prenuptial agreements. While an NIE number isn’t required to apply for a Spanish mortgage or to get a Spanish mortgage pre-approval, you do need the NIE certificates before you sign for the mortgage deed.
If your application is approved, you will need to set up a bank account and transfer money for the bank’s property valuation.
Once the valuation report is shared, you may need to make adjustments. The official valuation may differ from the agreed purchase. This could be more or less but if it’s the latter you’ll need to cover the deficit yourself.
If there are no legal issues and you have the right amount of money transferred into your new bank account then you can book a completion date with the seller and public notary and do the paperwork required.
On completion day your lender will arrange payment for the house and pay the relevant taxes through the public office in the presence of a notary. Once all the finances have exchanged and contracts signed, you should get the deeds and the keys to your new home!
This whole process can take 6-8 weeks if everyone included has the legal rights, documents and finances to begin with. It’s worth noting that if you want to relocate to Spain for more than 183 days in the year, then you will need to pay residential taxes, which include capital gains tax, investment tax and wealth taxes. There is further information on the legal process of buying property in Spain on the Spanish Mortgage Association website, it’s also worth checking with your countries foreign office for country-specific information (the UK, EU and USA offer advice in the English language) or you can read our Spain Buying Guide for further insight.
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