Obtaining a Mortgage in Spain

You have now decided you would like to buy a property and start living in Spain, great!

However, you may need a mortgage in order to buy your dream home, therefore, we strongly advise you to get your mortgage approved in principle before looking for a property to buy, there’s nothing more disappointing than finding your home in the sun and then finding out you can’t afford to buy it.

In addition, there are two groups that banks grant mortgages to; Non-Residents i.e. people who don’t reside full time and don’t submit their taxes in Spain and Residents, who obviously do.

Differences between residents and non-residents:

Both groups can usually apply for a mortgage, although there are differences between the two.

However, you will enjoy more favourable conditions if you are a Spanish resident.

So, which are the main differences between both groups?

First of all, non-residents will pay more. Why? Because the interest rate will be higher for them.
Furthermore, they will get less financing for the property, usually between 50/60% of the total amount to be paid. In that sense, residents in Spain will enjoy the highest loan-to-value mortgages (up to 80%), with lower interest rates.
Another important difference comes with repayment periods: being lower for non-residents. It’s fairly complicated to find loans with greater than 20 year repayment periods, when residents can get it up to 40 years.
In order to reduce risk even further, banks will usually concede a fixed type mortgage to non-residents. But that is not something true in all the situations.
Required documents will also be something to consider. Why? Because non-residents are asked an additional document: a credit rating from their country of origin.
Taxes will vary accordingly too. The ones residing in Spain for less than 183 days per year will pay different taxes, like the 3% they face when selling their property.
Finally, some mortgages for non-residents can be less flexible and a bit outdated. So, the importance of comparing is much more noticeable here.

In Spain, your mortgage will vary depending on the type of land the property is built on:

Urban land: These are properties in the village or on urbanizations (usually the plots on urbanizations tend to be between 200m2 and 1.000m2, although this can vary in some areas)
Rustic land: These are properties built in the countryside. So basically, to keep it simple, any property in the countryside.

Depending on the type of classification of the land, it is crucial you use the right bank, the same rule applies to solicitors, please note that they are completely different types of properties, so make sure to pick the right one.

As we specialise in country properties (rustic land) and these types of mortgages are more complex we are going to explain a bit more about them so that you can hopefully understand the process a bit better.

Once you have found your dream home in Spain and your mortgage has been pre-approved by the bank, the bank will request that the property is valued by an independent valuation company, known here as ‘tasación’.

The bank will grant the finance based on the valuation, so again, this is another important decision to make, who will be valuating your property?

As country property specialists, and based on our experience, we would strongly recommend buyers to use the services of the ‘Sociedad de Tasación’. (Association of Valuers) They are experts in carrying out valuations on these types of properties.

So, once you have your mortgage preapproved by your bank you have to instruct/pay for the valuation, this will cost around 450 Euros (depending on the size of the property). Once the valuator has visited the property you will receive the full report from them in about a week.

The bank will then officially approve the mortgage once then have received this report.

Now, let’s get to the figures and use an example:

Total purchase price:	336.000 Euros
Purchase price:	300.000 Euros
Purchase costs (12%):	36.000 Euros - this includes 8% transfer tax (applied to properties up to 400.000 Euros) solicitors fees, mortgage set-up fees, Notary fees & Land Registry fees.

Now, let’s assume you require a 70% mortgage, the bank will grant that percentage based on the purchase price of 300.000 Euros (excluding the additional purchase costs)

300.000 Euros (70%) mortgage:	210.000 Euros
Balance (savings):	126.000 Euros

We hope this information helps shed some light on this matter. But by all means, should you require any further information please contact us.