If you’re a cash buyer in Spain then that’s great news, you can skip this step. If you’re looking for a mortgage in Spain then read this article.
Arranging any mortgage in Spain can be a daunting prospect. For the uninitiated, it’s difficult to know where to start and whether information you see or receive is correct.
This is complicated by the fact that banks in Spain do not always offer the same conditions to clients, even if they have similar profiles. The mortgage market in Spain is quite traditional in the sense that having the right contacts is crucial if you want to get the best deals.
Mortgage Products
Non-resident mortgages (60-70%) – for Hungarians who pay their taxes outside Spain, the maximum mortgage amount is 70% of the purchase price (or valuation if lower), but some banks have a maximum amount of 60%. For Hungarians in Spain who are fiscal residents and pay taxes in Spain, the maximum mortgage is 80%.
Mortgages for retirees – If you are over age 60 and in receipt of a pension, you can still have a mortgage in Spain in your own name. It is also possible to appoint a guarantor such as a family member to secure the borrowing.
Construction mortgages – for those Hungarians wishing to build their own homes, banks offer construction mortgages in Spain. These are complicated to explain and you should definitely speak to an expert (lukentum can offer you this service), but broadly-speaking you can potentially borrow in Spain 60-70% of the land and construction costs combined.
Commercial – If you are buying a property for commercial use in Spain, such as a restaurant or a shop, for example, the maximum mortgage is 50% of the price (or valuation if lower). If you intend to run a business in Spain the lenders will ask for business plans and, where applicable, accounts for any previous business operating at the premises, as well as what previous experience you have had running a similar business in Spain or in Hungary.
Mortgage Conditions in Spain
Interest rates in Spain – Most lenders use the annual Euribor as the base rate and then add their own margin to this: “Euribor plus X%”. Generally speaking, they require that you contract different products with them and they give discounts to the rate for taking each product. Compulsory products are usually a bank account with the bank in Spain offering the mortgage and home insurance in Spain with that bank’s chosen insurer. In some cases, life insurance in Spain with the bank’s chosen insurer is also compulsory.
By using our services we can secure a 
much lower rate than if you go direct to a bank in Spain. Although the vast majority of mortgages in Spain are variable, fixed rates are becoming more popular, especially now that the Euribor is at its lowest ever level.
Interest-only in Spain– this is normally only offered for construction mortgages in Spain and, where offered, it is only for 1 or 2 years at the start of the term.
Term of mortgage – most mortgages in Spain can be arranged with terms of 25 years (for non-residents) and 30 years (for residents), usually up to a maximum age of 75. For non-residents, some banks in Spain have a maximum 20-year term.
The Qualifying Criteria in Spain
The lenders all use what is known as a debt-to-income calculation as the basis for deciding whether applicants will qualify for a mortgage in Spain. In basic terms, this means that your monthly debt commitments, including the new mortgage, must not exceed a given percentage of your net monthly income.
The typical percentage in Spain is between 30-35%.
There are many other variables to take into account, when asking for a mortgage in Spain but this gives a very basic idea of how the banks assess the applicants for the mortgage.
Application Process in Spain
- Initial, no obligation, assessment – we will advise you on whether a mortgage approval in Spain is likely and what conditions could be possible.
- Mortgage quote – following the initial assessment, we will aim to send a full mortgage quote.
- Sign up – if you wish to proceed, we will ask you to sign the terms and conditions.
- Submit application form – we will assist you with completing the relevant application form and we will submit this on your behalf with the appropriate supporting documents, which will be requested once you have agreed to proceed with the application.
- Decision from lender – if the mortgage in Spain is approved, we will confirm the conditions and ask if you wish to proceed.
- Set up bank account and instruct valuation – a bank account in Spain will be set up and you will be asked to deposit enough funds to cover the valuation fee.
- Valuation report in Spain– if the valuation is no lower than the agreed purchase price and the property has no legal issues, the completion arrangements can be made.
- Completion arrangements – we will work with the bank and your lawyer and they will confirm the funds necessary for completion, which must be transferred as soon as possible to your account with the lender. Once the funds are in the account, the lender will prepare everything and you can decide on a completion date at the Spanish notary.
- Completion day – the lender will draw up all the necessary cheques and arrange payment of the property in Spain and mortgage taxes from these funds. Once the property and mortgage deeds are signed, you become the owner of the property in Spain.
Timescales
The mortgage process in Spain from start to finish usually takes 6-8 weeks, but there can sometimes be delays that are outside of the control of us or the lender. We can advise on sensible timescales for payment of deposits and timing of completion, as well as deal with any delays if they arise.
