Getting a mortgage in Spain
If you are thinking of getting a mortgage in Spain then you should be aware that the procedure is in some ways very different to that which you are accustomed to in the UK.
Firstly, in Spain, to obtain any kind of mortgage or even personal loan, everything must be signed for before a Notary.
A notary is a public official and an expert in Law, who is required to ensure that certain transactions, such as property sales, wills and mortgages etc, are carried out correctly by validating all of the documentation presented and signed before them.
Secondly, the interest rates payable and the set up costs involved may differ greatly. Whilst the interest rates may be compatible with the rest of Europe, the set up costs are usually higher and can be anywhere between 3.5%-4% of the amount borrowed. The main fees are as follows:
- Spanish mortgage deed duty - 1.8% of the loan
- Bank fees – approx. 1% to 1.5% of the loan
- Notary fees - maximum 0.5% of the loan value
- Valuation fee normally 0.10% of the value of the property
- Mortgage broker fee – as agreed individually
Banks will not normally allow you to add the costs to the mortgage itself so it is important to bear these additional costs in mind when budgeting for your property purchase.
Spanish banks will lend to both residents and non-residents – but the offers available may be very different – for example, the amount loaned to non-residents would only be up to a maximum of 70% of the property value whereas residents can usually borrow up to 80%.
Types of Mortgages available
Spanish mortgages are usually at a variable rate (linked to EURIBOR) and on a repayment basis.
It is common for the rate to be fixed for periods of 12 months at a time at a set number of points above EURIBOR – the number of points having been agreed with the bank beforehand in the mortgage offer.
EURIBOR is the Euro Interbank Offered Rate and is determined by the average rates at which a panel of European banks can borrow money from each other at. It is updated daily.
Once a mortgage is in place in Spain it is unusual for borrowers to ‘shop around’ afterwards for better deals, as is often the case in the UK. This is due to the formalities required in setting it up initially along with the associated costs being prohibitive.
Terms
Spanish mortgage terms range from 5 to 40 years depending on age and the lender selected. Most Spanish banks will expect the mortgage to be repaid by age 70 but it is possible to obtain a mortgage up to age 80.
Mortgage Offer criteria
Your income net of tax will be assessed and the lending bank will want to see that the combined existing UK and new Spanish monthly liabilities do not exceed 1/3rd of your proven monthly net income. Rental incomes in Spain may be taken into account on a case by case basis.
Using a mortgage broker
Unless you already have a good relationship with a Spanish bank it is strongly recommend that you use a mortgage broker who will know the market and which banks are offering the best deals to suit you. Obviously this will incur a fee but you may save money in the long run by using their services.