Mortgages for Spanish Property

It comes as a surprise to some overseas buyers to discover that not only can they get a mortgage in Spain, but the rates are excellent and the process simple.

Here we cover the different types of mortgages that you can get and how to go about applying.

Types of mortgages available in Spain

You can get both fixed and variable rate mortgages in Spain, or even a mix of both:

Fixed rate mortgage

This is a popular choice among overseas buyers who prefer the stability of knowing exactly how much they will pay.

The drawback is that you may be paying slightly more than for variable. A fixed rate mortgage will protect you from potential interest rate rises, but the flipside is that you lose out to interest rate decreases. If you choose to exit the arrangement there will be charges.

Variable rate mortgages

Variable rate mortgages have an inherent risk and unpredictability caused by interest rate changes made by the European Central Bank. There is a chance that mortgage rates can be raised unexpectedly, due to external factors beyond your control.

Speak to an adviser who can inform you of recent interest rate movements to help you decide if a fixed rate or variable rate mortgage would be better for you.

All mortgages are based on repaying the capital by the end of the term – there are no interest-only or buy-to-let mortgages in Spain.

How much can you borrow on Spanish mortgage?

Typically, non-residents cannot borrow quite as much as resident buyers. Spanish residents can borrow up to 80%, while non-residents can get up to 70% loan-to-value (LTV).

If the property is under €100,000, then it’s likely you will only be able to get 60% LTV deal.

Bear in mind that this is a percentage of the property price. The buyer will also need to pay 10% to 15% in buying costs and these cannot be included in the mortgage. Therefore, realistically you will need to find at least 40% to 50% of the purchase price.

When applying for a Spanish mortgage, it is generally reckoned best to apply for the maximum amount with the bank initially. You can always choose to borrow less, but it will be harder to increase the mortgage if it’s not enough for you.

Mortgage eligibility criteria

Your eligibility for a Spanish mortgage will hinge on several factors, including income, existing debts and residency status.

The bank will assess your debt-to-income ratio, ensuring that it does not exceed, usually, 30 to 35% of your income. That includes all debts, including existing mortgages, car loans and credit cards.

If you have a mortgage in the UK and are not planning to sell, this does not in itself impact your eligibility for a Spanish mortgage. An issue would only arise if it negatively impacted your debt-to-income ratio.

Non-residents are generally only eligible for a mortgage repayment of 25 years, compared to 30 for residents.

Generally, the mortgage term can last up to the age of 70. It may be possible to find ones that go up to 75, so long as you have a strong pension in place.

Hence, if you are 60 and looking to get a mortgage for a Spanish property, then it would be for a 10 to 15-year term. However, there is the option of appointing a guarantor, such as a younger family member, to help secure the mortgage.

Documents required for a Spanish mortgage

To apply for a Spanish mortgage, you will need: a passport, utility bills, six months of bank statements (dependent on the lender) and proof of where the funds have originated.

You will also need an NIE number, the Spanish equivalent of a social security number. If you are employed, you will need the last three to six months of payslips.

Self-employed people will need to show the last two or three years of tax returns. Additionally, payments will need to be made through a Spanish bank account.

Finding a mortgage broker

You do not want to find the ideal property on a viewing trip to Spain without having contacted a mortgage broker. If you cannot find an affordable mortgage for the property you will not be able to make an offer and you will miss out. Understand what your budget is, including additional borrowing, before looking for a property.

A mortgage broker will use their network to find the best rates and focus on banks that are familiar with lending to foreign buyers to make things easier.

You can find a Spanish mortgage with a simple Google search, but make sure that you check their professional affiliations and credentials. Ask for references, if they have them, and make sure that they are familiar with your specific needs.

You can also use Your Overseas Home to find a reputable, English-speaking mortgage broker licenced to operate in Spain. Speak to their property consultants for further guidance.

The process of getting a Spanish mortgage

It typically takes about six to eight weeks for the process to be completed, with a ten-day cooling off period. However, before that you should be able to get an agreement in principle within days.

Here it is broken down:

1. Research and compare mortgage options with your broker.
2. Prepare and gather the relevant information and documentation.
3. Get a mortgage pre-approval for an idea of how you can borrow.
4. Search for properties.
5. Commission a property valuation: the bank will need to know the value of the property before finalising.
6. Finalise the mortgage application.

Interest rates

Interest rates vary depending on the lender, the strength of the case, and the loans to value. At the time of writing (mid-2024) it is possible to get a rate of 2.5% for a year or even a 3.75% fixed rate for three years.

If there is more than one income involved, then you will have more options for interest rates.

For those on smaller budgets, if you purchase a property for around €60,000 or lower (the minimum is €30,000) you should anticipate higher interest rates.