Mortgage in Spain

Looking for a mortgage in Spain as a non-resident? In this article, we discuss all aspects of financing your dream home in Spain. We dive into the details of the Spanish mortgage system and give you valuable insights for a successful application.

The basics of a Spanish mortgage for non-residents

Financing a property in Spain through a Spanish bank requires a good understanding of the local mortgage rules. These differ in some ways from what you may be used to in your home country.

Spanish banks typically offer a maximum mortgage of 70% of the home value for non-residents. This is considered top financing for foreign buyers. It means you need to finance at least 30% of the purchase price from your own funds.

When calculating the mortgage, Spanish banks look at the purchase price of the property or the appraisal value. If the appraisal value is lower than the purchase price, the bank will calculate the mortgage based on this lower value. This may result in lower financing than initially expected.

Factors affecting the amount of your mortgage.

Spanish banks take several factors into account when determining the maximum mortgage amount. Your income, disposable income, current interest rates, property type and location all play a role. An important measure is the debt-to-income ratio, which indicates the percentage of your income that can be spent on paying off debts, including the mortgage. Typically, no more than 30-35% of your net monthly income should go on mortgage payments.

Important conditions

A Spanish mortgage has a maximum term of 25 years for non-residents. In addition, the mortgage must be fully annuitised before reaching the age of 75. This means that, for example, a customer who is 55 years old has a maximum term of 20 years on a mortgage. In a couple, banks often base the term on the age of the oldest person.

The process of applying for a mortgage in Spain

Obtaining a mortgage in Spain involves several steps. First, you submit a mortgage application to a suitable Spanish bank or mortgage advisor. The bank will then assess your application and financial situation, including a valuation of the desired property. After approval, you will receive a mortgage offer, which you should study carefully. Upon acceptance, the mortgage is finally closed at the notary.

It is crucial to know that in Spain, making an offer on a property ‘subject to financing’ is not common. While you may be given some time to finalise the financing, this period is usually not enough to go through a completely new mortgage process. Therefore, it is essential to research beforehand whether and how much you can borrow.

A new law requires Spanish banks to adhere to EU standards, which has led to some important changes:

- Early repayment has become more attractive. For a variable rate, the penalty in the first five years is 0.5% on the amount to be repaid, then 0.25%. For a fixed rate, the maximum penalty is 2% in the first five years, 1.5% thereafter.
- Mortgage fees have been reduced. The bank is now responsible for most one-off costs when taking out the mortgage, such as notary fees (in relation to the mortgage), land registry registration and mortgage tax. The customer now only pays the bank's valuation and administration fees.

Please note! Additional costs when buying a property

Besides the mortgage itself, there are additional costs to consider when buying a house. These can amount to around 10-14% of the purchase price and include transfer tax, notary fees, registration fees and legal advice costs. These costs are not covered by the mortgage and come on top of the 30% you have to finance yourself.