Mortgages in Spain
There is a veil of secrecy and complexity that surrounds the world of mortgage lending. Some of it is deliberate: it helps disguise some of the finer points that are to the lenders gain. Here we try to make it a little clearer.
The first thing to remember is that mortgages in Spain are attached to the property and written into the escritura (title deed). Many properties, especially new ones already have a mortgage attached to them (this is a common way for a developer to finance construction) and you can simply take this over, avoiding the need for set up fees. Spanish banks will usually lend non-residents between 60% and 80% of the declared value of the property, secured against the property in Spain or your property in your home country.
As in the UK, you’ll be required to provide proof of identity and proof of earnings, typically by supplying your last three salary slips, recent bank statements, a copy of your passport and sometimes a letter of reference from your employer. If you are self-employed, you’ll need to provide the last few years of your accounts, a report from your accountants, most recent tax return, recent personal bank statements and a copy of your passport.
You will also need to provide the bank with a copy of the sales contract (‘Contrato privado de compraventa’) and a Nota Simple from the property registry, which identifies what, if any, debts are attached to the property.
Mortgages are available up to 80% of the mortgage valuation, this figure is the maximum guideline set by the Bank of Spain for non-residents, so normally it will not be possible to borrow more than this in Spain.
Spanish banks can only lend on the basis of a mortgage valuation and not a market valuation. Mortgage valuations are carried out as prescribed by law in Spain
Where a property is bought “Off Plan”, it is possible to lend up to 80% of the mortgage valuation, which will be done at the end when the property is ready. If prices continue to rise during construction, this may be 100% of the agreed price. The bank cannot grant the mortgage until the property has been completed and registered. Until then it does not exist in law in Spain, so you cannot buy it, and it cannot be mortgaged.
The contract you sign at the start is not a purchase contract, but a contract in which you commit to buying the property at a future date when it has been completed. As a result, any stage payments are an unsecured loan to the builder, and your lawyer must make sure they have the legally required bank or insurance guarantee in place.
So a mortgage in Spain cannot finance the stage payments during the construction period (but the bank can still lend you the 80% maximum once the property is completed and registered, irrespective of how much you have paid in stage payments). You need to either finance this yourself and recover this amount from the mortgage at the end, or we can help by arranging a re-mortgage of your UK property for the amount of the stage payments, and do the mortgage in Spain for the final payment.
If the property in Spain is to be your main home, in order to grant you a mortgage you must have a guaranteed income. If your UK income will continue, or you have a pension, there is no problem. If you will be employed in Spain, we will need to see your new contract and 3 months’ payslips.
If you wish to make an application simply e-mail the enquiry form from our website. We do not require any documentation to support your application at this stage.
You do not have to wait until you have found a property before you send the enquiry form. You can send it in advance so that we can consider issuing an approval in principle, based on your current financial situation, before you commit yourself to a purchase.
Finally, the mortgage process takes approximately 5 weeks from start to finish allowing for the time to get the documents to you from Spain, and for you to sign and return.
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