The Process Of Getting Mortgage In Spain 2022
Mortgage in Spain or home loan is the financial or banking product that the average saver spends the most money on in Spain. Many individuals still prioritize getting a mortgage to buy a property, which we can do with the aid of mortgage loans.
Author:Dexter CookeReviewer:Darren McphersonNov 15, 2022122.1K Shares1.6M Views
Mortgage in Spainor home loan is the financial or banking product that the average saver spends the most money on in Spain. Many individuals still prioritize getting a mortgage to buy a property, which we can do with the aid of mortgage loans.
Our mortgage experts outline all the information you require to compare mortgage loans, including what a mortgage is, the many types of mortgages that are offered, and how to apply for one.
You should carefully read this advice if you're thinking about acquiring a mortgage in 2022 so you can pick a strategy that satisfies your requirements. We strongly advise you to educate yourself about mortgages and how they work before making a decision.
Different Mortgages In Spain
Spain provides ordinary mortgages as well as mortgages tailored specifically for expats from international and Spanish banks.
While certain packages prefer buyers from particular countries or those buying property in particular localities, many Spanish mortgages have no restrictions on the purchase price or country. But which mortgage products are most popular?
Mortgages For Non-residents
The most important differential between residential and non-residential loans is the maximum loan-to-value (LTV) that banks will permit. Depending on the type of mortgage, non-residents are typically limited to an LTV of 60 to 70 percent, but locals can borrow up to 80 percent of the assessed value of the property.
The good news is that you could be able to borrow far more of the property's value, up to 100% in some circumstances, when buying a bank-owned repossessed home in Spain.
Only foreign purchasers who are interested in their own real estate listings may be eligible for mortgages from some banks. Your financing options in this situation can be very dependent on a certain house.
In some circumstances, the mortgage you obtain may be based on the bank assessor's evaluation of the property rather than the price you are paying for it. If an appraiser assessed your home at €125,000 even though you only paid €100,000 for it, you may borrow up to €87,500.
Mortgage In Spain For Seniors
As long as you are getting a pension, you are eligible to obtain a mortgage in Spain if you are over 60 and want to retire there.
When requesting a retiree mortgage, you might choose a guarantor, such as a relative, to protect the loan. You might be able to profit from some tax advantages if the guarantor is also a co-owner of the property.
Business Mortgages
You can think about buying a café or a shop if you're beginning a business in Spain. By submitting a commercial mortgage application, you can finance your venture in this circumstance.
Loan regulations for businesses differ slightly from those for individuals. The bank or lenders will ask for all necessary documents for the business you wish to run in this circumstance.
You will therefore need to provide your business plans, financial documents from any prior companies, and documentation of prior experience. Up to 50% of the acquisition price or worth of the business you wish to buy can be financed with commercial loans.
Mortgages For Construction
If you wish to develop your own home, you can apply for a construction mortgage in Spain. Construction loans can be difficult to obtain, and the amount of money you qualify for depends on your circumstances.
Generally speaking, you could be able to finance 60–70% of the entire cost of the land and building. A mortgage for construction will have a higher interest rate because there is a greater risk of an unfinished project.
Obtaining A Mortgage In Spain While Not A Resident
There is no denying that more foreigners are investing in real estate in Spain. The Spanish Property Registry released statistics showing that more than 61,000 residences were bought by foreigners last year, making up 13% of all sales. In fact, 7% of all mortgages provided in Spain for the purchase of real estate were signed by foreign nationals.
Loans from financial institutions to foreign nationals or citizens who do not have a permanent residence in the nation, that is, who have not spent more than 183 days there during the calendar year, or who do not have Spain as the main focus of their activities, are known as non-resident mortgages.
How To Apply For A Mortgage In Spain?
- Make the necessary documentation:Below is a list of all the documents you must provide to your bank. These records, which show your income and debt levels, will help the bank assess your risk profile.
- Look into pre-offers and compare different banks:Now that you have all the necessary paperwork, it's time to do some mortgage research! Discover which Spanish banks offer the best mortgages there, then start requesting pre-approvals. Send the necessary paperwork to the bank you think is best suited to your needs to obtain pre-approval, and they will make you an offer.
- Establish a bank account:You can decide how much and when you must pay by comparing all of the offers. You can open a bank account and put the money into it that you need to pay off the mortgage.
- Identify offers to compare and decide the best possibility:Choose the bank that best matches your needs by contrasting the many offers you receive.
- Inscribing a mortgage:The moment will eventually come for you to sign the mortgage document. To formalize everything at this point, you might require a notary.
Take This Into Account: Although it is not mandatory to have life insurance when applying for a mortgage, certain lenders may insist that you have property insurance, so be ready.
Spanish Requirements For Obtaining A Mortgage
The requirements for citizens who need a mortgage for a non-resident are stricter than the requirements for citizens who live in Spain. Why?
The justification for this is that obtaining assets from outside is far more difficult in the event of default and non-payment, leaving only the property acquired in Spain as a guarantee.
Due to the smaller proportion of financing permitted in non-resident mortgages compared to other mortgage loans, a customer applying for a mortgage is required to have more resources to fund the down payment. This type of mortgage has a financing ratio of about 60%.
The maximum amount of time for repayment is often 20 years.
Non-resident mortgages have higher interest rates than resident mortgages, mostly because it is more challenging to adhere to the purchase of things tied to the mortgage, such as direct deposit of the paycheck.
Additionally, the customer will know exactly how much he must pay back with a fixed-rate mortgage for non-residents and will be able to rent the home with certainty.
Documents Needed To Get A Mortgage
When requesting a non-resident mortgage loan, the following documentation is needed:
- A passport or NIE photocopy.
- A certificate proving your lack of Spanish residency.
- Employment agreement.
- Your most recent payslips, collected in your home country.
- For the most recent year that the salary was paid, including a bank statement.
- Return of tax.
- Document proving tax residency.
- Contract for the purchase of the home.
- The most recent three receipts for paid-off debts.
Even while more and more financial institutions are accepting scanned documentation, it will still be essential to establish a Spanish bank account, get the appropriate documents translated into Spanish, and produce the originals in person.
Benefits Of Beginning Early In Your Spanish Mortgage Search
You have nothing to lose by starting as soon as you can.
Planning beforehand can help you better grasp the advantages and disadvantages of getting a mortgage in Spain and will help you decide how much, if any, to borrow.
By planning your Spanish mortgage in advance, you may get the best mortgage in Spain for your requirements and prevent overpaying.
If you take steps to set up your Spanish mortgage early on, you will have a better idea of how much you can spend on your Spanish property and be able to determine the likely future financial effects of your purchase.
The likelihood that you will lose the Spanish property you have spent so much time and money searching for is reduced by having a Spanish mortgage in place. It also means that there will be one less thing to worry about and strain over when it comes to closing on a Spanish property.
Classifications Of Spanish Land And Other Potential Loan Restrictions
Banks are prepared to make loans secured by urban land. Rustica property is rarely approved for financing by banks, and when it is, the loan-to-value ratio will be lower.
It's a good idea to check the land status of any potential properties early on in the loan application process. Only a few Spanish banks currently offer to finance for substantial reforms or building loans. Where applicable, loan-to-value restrictions will apply, and rates will probably be higher.
Home Buyer Appraisals For Spanish Financing
The valuation levels will only take into account meters that are completely registered at the land registration and listed on the property paperwork.
Any unregistered overbuilding, additions or other property improvements will not be allowed to be taken into account when calculating a mortgage.
Although new legislation may allow you to select your own valuation company as long as it is a Bank of Spain, all lenders will use their preferred valuation business.
How Do Spanish Banks Evaluate The Affordability Of A Spanish Mortgage?
Spanish banks base their affordability standards on net income as opposed to gross revenue.
Typically, only income included on personal tax forms is taken into account. Only a small number of Spanish banks will look at a company's net profits, and not all banks will take a self-employed person's full dividends into account.
Various banks have different policies about how to approach existing buy-to-let mortgages and rental revenue.
Some Spanish banks won't lend to persons who own more than one investment property in the UK, and the ratio of debt payments to rent payments can prevent landlords who specialize in buy-to-let properties from being able to meet some of the banks' affordability requirements.
Most banks will take into account 100% of net income after taxes, however, a few will only take into account 80% and some will require minimum incomes.
Your monthly outgoings for loan and debt payments, including the new loan, must be less than 35% of your net income in order to comply with the normal standards for obtaining a mortgage in Spain.
The primary underwriting criterion is affordability; requirements are not relaxed with lower loan-to-value ratios, and Spanish banks do not take asset wealth into account.
Subrogation
It is possible to assume or revert a current loan secured by Spanish real estate. It should be looked into to determine if a loan against the property you are buying already exists, despite the fact that many banks have stopped offering this facility because old loan conditions were much better than new loan terms.
What are the mortgage's terms, how much money is owed in the capital, and would the current banks consider subrogation?
The primary benefit of subrogation in the past was the ability to avoid paying the mortgage deed tax, which was only levied on brand-new loans. Due to the fact that all banks are covering the costs, cost subrogation may be more challenging to get.
How Spanish Banks Evaluate The Affordability Of A Spanish Mortgage
Spanish banks base their affordability standards on net income as opposed to gross revenue. Typically, only income included on personal tax forms is taken into account. Only a small number of Spanish banks will look at a company's net profits, and not all banks will take a self-employed person's full dividends into account.
Various banks have different policies about how to approach existing buy-to-let mortgages and rental revenue. The assessment of debt expenditure vs. rent arrival can make it impossible for landlords of buy-to-let properties to meet some Spanish banks' affordability rules.
As a result, some Spanish banks will not lend to anyone who owns more than one investment property in the UK. Most banks will take into account 100% of net income after taxes, however, a few will only take into account 80% and some will require minimum incomes.
Your monthly outgoings for loan and debt payments, including the new loan, must be less than 35% of your net income in order to comply with the normal standards for obtaining a mortgage in Spain.
The primary underwriting criterion is affordability; requirements are not relaxed with lower loan-to-value ratios, and Spanish banks do not take asset wealth into account.
Jump to
Different Mortgages In Spain
How To Apply For A Mortgage In Spain?
Spanish Requirements For Obtaining A Mortgage
Documents Needed To Get A Mortgage
Benefits Of Beginning Early In Your Spanish Mortgage Search
Classifications Of Spanish Land And Other Potential Loan Restrictions
Home Buyer Appraisals For Spanish Financing
How Do Spanish Banks Evaluate The Affordability Of A Spanish Mortgage?
Subrogation
How Spanish Banks Evaluate The Affordability Of A Spanish Mortgage
Dexter Cooke
Author
Dexter Cooke is an economist, marketing strategist, and orthopedic surgeon with over 20 years of experience crafting compelling narratives that resonate worldwide.
He holds a Journalism degree from Columbia University, an Economics background from Yale University, and a medical degree with a postdoctoral fellowship in orthopedic medicine from the Medical University of South Carolina.
Dexter’s insights into media, economics, and marketing shine through his prolific contributions to respected publications and advisory roles for influential organizations.
As an orthopedic surgeon specializing in minimally invasive knee replacement surgery and laparoscopic procedures, Dexter prioritizes patient care above all.
Outside his professional pursuits, Dexter enjoys collecting vintage watches, studying ancient civilizations, learning about astronomy, and participating in charity runs.
Darren Mcpherson
Reviewer
Darren Mcpherson brings over 9 years of experience in politics, business, investing, and banking to his writing. He holds degrees in Economics from Harvard University and Political Science from Stanford University, with certifications in Financial Management.
Renowned for his insightful analyses and strategic awareness, Darren has contributed to reputable publications and served in advisory roles for influential entities.
Outside the boardroom, Darren enjoys playing chess, collecting rare books, attending technology conferences, and mentoring young professionals.
His dedication to excellence and understanding of global finance and governance make him a trusted and authoritative voice in his field.
Latest Articles
Popular Articles