Mortgages in Spain

In much the same way as the UK most Spanish banks and building societies consider mortgage applications on the applicant applicant’s merits. They require proof of income, normally in the form of a p60, three months of pay slips and a recent tax return. Pension and income from investments, permanent benefit allowances, and rental income may also be taken into account. Please note that proof of the above will be required.

Most banks lend on a rate quoted as a percentage above the Euribor (the European equivalent of the Bank of England base rate). Thus a typical rate at present for a loan will be referred to as Euribor plus 1%.

Rates are usually fixed for the first year and fluctuate thereafter with the Euribor. Fixed rate mortgages in Spain are not so common. It is worth checking if there are any penalties for early full or partial settlement of the loan.

• The costs of mortgaging

Arrangement fees will vary but are normally around 1.0 - 1.5% of the sum borrowed. A typical bank valuation will be around 0.1% of the sum borrowed.

In Spain, a mortgage must be registered with the authorities and stamp duty paid. This will attract further costs of around 1.75 - 2.25%. Thus if you are mortgaging a property you will need to allow about 13.50% on top of the purchase price to account for mortgaging costs, legal, tax and agent’s fees.

• Restrictions on application

These vary according to the lender but may include not only earnings requirements but also age and residency status. Normally a non-resident can only borrow around 70-80% of the official purchase price or the bank valuation – whichever is lower. More about this subject later!

Lenders are usually prepared to offer up to 30 year terms subject to the mortgage being repaid prior to the age of 65 or 70. Mortgages extending beyond the age of 70 normally need to be underwritten by a life insurance policy and may only be offered over a shorter term.

If age looks to be a problem then a UK mortgage could be the answer as British banks seem to be more relaxed on this point.

• Property restrictions

Properties will need to be sound, habitable, insurable and with registered title deeds. In any case, you will probably want to avoid properties with these deficiencies.  

• Possible problems

You should be sure that the mortgage has been approved in principle prior to signing a deposit contract as you will forfeit your deposit if you cannot complete due to lack of funds. For more information on deposit contracts see our FAQs on house buying.  

Finally, consider carefully the “official” price to be declared for the sale. See our FAQ on how much to tell the taxman. By agreeing to reduce the official figure you may be restricting the amount a bank will be prepared to lend. They will of course be wary of advancing more than the official purchase price of the house!

As in the UK, lenders are keen for business and can be quite flexible. Just how much will depend on the loan to value risk involved, property type, and security of the loan.

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For more information on Valencia and our range of property go to:

www.rawlinsholden.co.uk or in Spanish at www.rhinmobiliaria.com

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