Mortgages in Spain

You will probably find the Spanish model for home financing different comparing from your home country. When taking out a mortgage (Hipotecas) in Spain, it is done via the “Notary system” and mortgages must be signed with Notary.

The cost of taking out mortgages in Spain can be higher than you’re used to from your home county. So it is a good idea always to start by seeing what loan options you have in your home country, for example, by taking out additional loans in current property.

The acquisition of housing will probably be one of the most important economic operations that you perform throughout your life. In order to carry out this purchase, which will normally be of a high amount, it will be necessary to request a loan or a credit, unless you has savings to meet the payment, which will normally be guaranteed with a mortgage on the housing in question.

Would you like to know more about mortgages in Spain?

Being an operation of such importance, it is essential that those who are going to apply for a loan or a mortgage loan have sufficient information to know the basic characteristics of these operations, both to compare offers and choose the most interesting for their needs and to be aware of the obligations you are assuming when you hire it.

When it comes to the financing your home in Spain, there are two important elements to consider: the price of the money that is lent (the interest rate) and the repayment term.

A good advice – always look for the APR (La TAE in Spain). It is the indicator that, in the form of an annual percentage, reveals the cost or effective return of a financial product, since it includes interest and bank charges and fees also considering the periodicity with which payments are made.

In Spain, banks typically have mortgages in 2 groups.

  • Mortgage for "non residence". Expect a maximum of 70% loan
  • Home mortgages. Expect a maximum of 80% loan

The currency term can last up to 30 years, but no longer until you reach 70 years.

At Dahls Estate & Management, we help you with contact to local banks. Even without financing needs, as a homeowner in Spain, you need a "day to day" account from which your fixed bills for the property and tax can be deducted via Direct Debit.

Typical fees

You should expect the following costs:

  • Spanish Land Registry 1.8% of loan amount
  • Banking fee which can be 1- 1.5% of the loan amount
  • Notary costs, which can amount to a maximum of 0.5% of the value of the loan
  • Valuation, about 0.10% of property value

Types of Mortgages In Spain

  • Mortgages with fixed interest rates
  • Mortgages with variable interest rates

Mortgages with a fixed interest rate are typically slightly higher than the variable interest rate - typically up to a maximum of 5 years with a fixed interest rate. But ... here you should be aware of any special redemption conditions during the period in which you have fixed the interest rate. It can provide security with fixed interest rates, but also financial challenges if you choose to repay the loan before the agreed time.

Mortgages with variable interest rates are usually associated with the Euribor interest rate, and the interest rate is revised every year. That is, your interest rate for the first 12 months is determined by the Euribor + the fixed margin above what the bank charges.

Re - mortgage your loan

Opportunities for additional loans can be obtained from some Spanish banks - but far from all. This is partly due to the processes in the registration system. In Spain, it may be difficult and expensive to make changes to your mortgage after completing your home purchase.

The best advice on raising finance in connection with the home purchase - Get the most financing from the start. It is better to pay off the loan on the way if the possibility of this is to stand in a situation where you can´t raise additional financing in the property despite the current low mortgages. There may also be a tax aspect to it that you should discuss with your tax advisor.

To be approved for Spanish home loan

The Spanish banks first and foremost look at the following credit criteria:
- Annual income after tax
- The monthly payment on the loan must not exceed 30% of your income

Rental income in Spain may be included in some cases, but it will always be an individual consideration depending on your finances and the rental potential of the property.

If you can only document income outside of Spain, you can expect the bank to ask for official translation of your documentation on income and 3 months bank statements. If you are self employed there is an increased documentation requirement for income - often 2 years of accounting.