Your Complete Guide: How to Get a Mortgage in Spain as a Foreigner
Spain's real estate market has an alluring appeal to foreigners worldwide, with its rich culture, beautiful landscapes, and promising investment opportunities. If you're a foreigner contemplating buying property in Spain, understanding how to get a mortgage, navigate bank loans, and handle property financing in Spain is critical. This comprehensive guide will offer insights to help you confidently navigate this process.
Online Mortgage Application in Spain
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Eligibility and Documentation for a Mortgage in Spain
Contrary to some misconceptions, foreigners are eligible for bank loans in Spain. Banks typically lend non-residents between 60-70% of the property's value. To meet the banks' requirements, foreigners usually need to present lower debt-to-income ratios than residents.
To ensure a seamless process when getting a loan in Spain, prepare the necessary documentation in advance. This often includes proof of identity (like a passport), income evidence (recent payslips, tax returns), proof of current residence, a 'Non-Resident Certificate' from the Spanish consulate or embassy in your home country, and a comprehensive list of your current assets and liabilities.
When exploring property financing in Spain, understanding the prevailing mortgage rates is crucial. These rates can differ significantly depending on your chosen bank, the loan-to-value ratio, and your credit history. Spanish mortgages often rely on the Euribor (Euro Interbank Offered Rate) plus a fixed interest margin set by the bank. Non-resident rates generally fall in the 2-3% range, although these figures can change with varying economic conditions.
While the list of required documents for a mortgage application may seem extensive, they can be easily prepared. The documents typically include:
- Copy of the passport
- NIE Number
- Marriage certificate (if applicable)
- Proof of income or employment
- Latest income tax returns
- The property purchase agreement with the seller
- Proof of property tax payments up to date
- Information on existing loans
- Proof of current assets and debts
- Copy of property deeds in Spain and other countries
- Credit rating from the applicant's home country (for non-residents)
It is essential to ensure that all documents are in Spanish or English.
Choosing Your Mortgage Type
Spain offers two main types of mortgages: variable-rate and fixed-rate. Variable-rate mortgages come with an interest rate tied to the Euribor, meaning your payments may increase or decrease. In contrast, fixed-rate mortgages have a steady interest rate throughout the loan, ensuring consistent payment amounts. Specific mortgage options cater to different situations and needs:
Resident Mortgage: Spanish tax residents can apply for an 80% mortgage based on the property price.
Second Home: Those purchasing a holiday home can secure a mortgage of up to 60-70% of the property price.
Off-Plan Future Home: With this mortgage, you can obtain pre-approval at the time of reservation, and the customer profile is updated during the construction phase. This expedites the process, ensuring a smoother property handover.
Buy Land and Build Your Home: This type of mortgage requires more detailed work and offers tailored services to suit your specific requirements.
Multiple Property Purchase: If you already own a property in Spain or Portugal, you can acquire a 50% mortgage for investment purposes.
Property above 1 Million Euro: By depositing secured funds in private banking, you can obtain a mortgage of up to 100%. This option involves assessing risk profiles and detailed private banking work.
Equity Release on Spanish Property: If you already own a property in Spain and plan to purchase a new one, you can obtain up to a 90% mortgage by offering a double guarantee. This allows you to buy a new property without waiting for your existing property to sell.
In addition to the mortgage amount, it's important to consider additional costs when purchasing a property in Spain, which can amount to approximately 10-12% of the property value. Therefore, it is advisable to have a minimum of 40% of the property value available before applying for a mortgage.
Property Valuation: A Vital Step
Before you secure a mortgage in Spain, the lender will order an official property valuation. This appraisal is crucial for ensuring that the asking price aligns with the property's actual market value, thus safeguarding your investment.
Why You Need Legal Advice and Translation Services
Given the intricacies involved in property financing, it's beneficial to enlist the services of a local lawyer who is fluent in Spanish and your native language. They can help review contracts, ensure your interests are protected, and simplify the translation of complex terms and processes.
Factoring in Additional Costs
When considering how to get a mortgage in Spain, be mindful of the extra costs involved, beyond the property price. These might include property tax, legal fees, notary fees, registration and administration fees, mortgage arrangement fees, and property valuation fees. Factoring in these costs early can save you from future financial surprises.