How do I get a mortgage in Spain?

Everything you need to know about applying for a mortgage in Spain.

What is the mortgage process in Spain?

It can be difficult to apply for a mortgage in Spain if you unaware of the procedures and paperwork involved. The banks are keen to lend to non-residents, but there is strict criteria that needs to be adhered to in order to make the loan happen.

The Spanish government actively encourages Brits to invest in property in the country, with local laws also being favourable to overseas buyers. Indeed, as a UK taxpayer, you will be able to choose from similar mortgage products to Spanish citizens, but only if you know what to do.

The Spanish property market is in decent shape right now; house prices and sales have both climbed steadily, but not so quickly that they have become unaffordable or there isn’t plenty of scope for further growth.

 

So, what steps do you need to take to get a mortgage in Spain?

The stages of obtaining a Spanish mortgage are typically as follows:

  • Providing the bank or mortgage lender with the necessary documents (detailed below)
  • If the bank’s risk department gives formal pre-approval, they will then present you with a mortgage offer called an Agreement in Principle (AIP)
  • When you accept the offer, the bank will open the account and send the account details
  • The bank orders the valuation and the mortgage is approved. You will then be sent an official mortgage offer
  • The arrangement of completion between the bank and the client or legal representative in Spain can then be confirmed. Foxes can help you with all of the Legal Services you require as well as the financial side of things.

You can expect to be asked to provide these documents:

  • Your passport, as well as ID for all of the mortgage applicants
  • Your NIE, otherwise known as your ‘Número de identificación fiscal para extranjeros’ or Foreign Resident’s Tax Number
  • Tax Declaration or P60 for the last two years
  • The last three pay checks from your contracted employment
  • 6 months bank statements showing your income landing in your account
  • Employment contract if employed
  • Credit report (There are a few options in the UK, including Experian, and Equifax) Please be aware that Experian ask you to sign up for a free trial to download your report, which you can cancel before they charge you)
  • Nota Simple – Details of the property you are buying
  • Self Employed? – Self Assessment Form SA302
  • Other Property – If you own a property with a tenant, banks will require a copy of that rental contract and proof of income from the property.

 

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How does the process differ between Spanish and UK lenders?

As aforementioned, it’s perfectly possible to get a Spanish mortgage as a non-resident, including from a Spanish bank. Indeed, you might find that the interest rates you can obtain from Spanish lenders are more competitive than those on offer back home.

That’s because most Spanish mortgages are calculated on the basis of the Euro Interbank Offered Rate (Euribor), which remains at all-time lows, having been in decline since 2009.

Spanish mortgages differ from the UK in that you can’t switch lenders (without substantial costs) so you have to get it right the first time. Currently there are some fantastic mortgage products on the market that:

  • Are free of any opening commissions
  • Have no early redemption penalties
  • Are free of any abusive ‘floor clauses’ to ensure the rates are correct and you are not over paying
  • No mandatory unwanted insurances that can inflate the costs unnecessarily

As with so many things when you come to buy a Spanish property, the approach you take will depend on your own preferences and circumstances.

What are the current conditions for obtaining a Spanish mortgage?

The answer to the question “How do I get a mortgage in Spain?” will always be affected by the market conditions at any one time. We would therefore advise you to keep an eye on the latest Spanish mortgage rates and other factors currently affecting the property market in the country.

As of December 2018, for instance, the average mortgage in Spain has an interest rate of 2.57%, which represents a 4.3% drop from a year ago. Indeed, it is the lowest rate ever recorded, which may just encourage you to finally take the plunge on that long-held Spanish property dream.