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By Simon Conn | Mortgage Advisor

Updated: 15th June 2020*

If you’re dreaming of buying a Spanish property, whether it’s for your retirement, as a second residence, holiday home or buy-to-let, it won’t be long before your sun-soaked fantasies turn to the more practical matter of a mortgage.

With a British expat population of over 200,000, getting a mortgage for a Spanish property is certainly a realistic option for many UK buyers, but if this is your first foray into foreign property, you may be unsure of where to start, particularly if you don’t speak the language.

Fortunately, the process can be made easier with a good international mortgage broker who understands the different rules regarding taxes and property laws. Don’t hesitate to make an enquiry if you’d like us to match you with an English speaking specialist advisor with particular experience of the Spanish market.

To help make the process of getting a Spanish mortgage as smooth as possible, we’ve created this guide based on some of the most common questions our customers ask us on this topic, including:

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How easy is it to get a Spanish mortgage as a non-resident?

The eligibility criteria for Spanish mortgages are fairly similar to those required by many UK lenders, with the standard length for a mortgage usually being 25-30 years.

As is true for any mortgage application, the biggest factor for most lenders is affordability. To establish whether or not you can afford your Spanish mortgage as a non-resident, most lenders will look at your:

  • Income
  • Employment type
  • Age
  • Any bad credit or debt you have
  • The type of property you’re buying

How much could you borrow for a mortgage in Spain?

The amount you could borrow for your holiday home or residence in Spain will vary depending on your circumstances as well as your choice of lender.  However, the average loan to value (LTV) ratio tends to be around 60-70% – if you live, work and pay taxes in Spain this could possibly be higher.

So, for example, if you wanted to buy a Spanish property worth €200,000 and your lender agrees to loan you 70% of the property’s market value, they would give you a mortgage of €140,000.

This would mean that you need a 30% deposit of €60,000.

Don’t forget, each mortgage lender operates by a slightly  different set of rules. This means that even if you’re rejected by one, you could still be approved by another.

Can you get a 100% mortgage in Spain?

While 100% mortgages are available in Spain, they are only likely to be offered in exceptional circumstances, and not to foreign buyers.

The more money a bank loans, the greater the loss if the loan is not repaid.

Therefore the majority of lenders will only agree to lend higher percentages of a property’s market value if the borrower has exceptionally good credit, a higher income and viable security.

Things to look out for when getting a mortgage in Spain

When moving from the UK, it can sometimes be more complicated to get a mortgage in Spain because there are different rules, taxes and processes when it comes to property, not to mention a different language. These factors include:

Property laws

There are many laws in Spain that differ to those in the UK regarding property.

For example, a law that  came into agreement in 2015, can affect the process of divvying up who is entitled to your property when you die without a will in place.

Until then, Spanish law allowed the law of a person’s nationality to apply to the devolution of their property, but in order to simplify the process, a person’s ‘habitual residence’ and not their nationality will now come into effect.

To ensure you fully understand and can comply with differences in property law such as this one, it’s crucial that you instruct a solicitor who is registered with the Law Society in the UK and who specialises in international transactions and property conveyancing.

Tax

The amount of tax you pay in Spain will largely depend on whether you rent out your property or not, but there are other differences between the Spanish and UK tax system you’ll need to be aware of.

For example, if you have a mortgage as a non-Spanish resident, you may be surprised to know that you will be expected to pay income tax even if you don’t rent out the property.

A mistake or a misunderstanding of how much or what tax you’re required to pay could end up costing you a lot of money in missed payments and fees, so it’s recommended that you work through the requirements with a mortgage advisor who has a proven history of handling Spanish mortgages.

Planning permission

If you plan to do any work on your property, you’ll need to know a bit about planning permission regulations in Spain, and how they may apply to the type of work you might want to carry out.

Smaller modifications, such as new doors or windows, for example, will require a works license from the local town hall, which grants permission to carry out the work.

More substantial work will require a different type of license: there is a range of  planning licenses to choose from and once you know which is required, you’ll need to fill out the relevant forms (in Spanish) and pay a fee.

In some cases you may additionally need to pay a small tax between calculated at 2-6% of the overall cost of the work based on the information you provide to the local authorities.

It’s important to check the paperwork carefully with your solicitor when planning any building work, as doing so without the correct permissions could result in heavy fines or even prosecution.

Can you get a Spanish mortgage with bad credit?

All lenders will look at your credit history to establish whether you have a track record of mismanaging your finances and how likely you are to default on your Spanish mortgage. Getting a non-resident mortgage in Spain can prove tricky if you’ve had any credit problems within the last six years.

Loaning a larger amount of money can be risky to a lender, so they will want to be confident that the borrower will be able to afford their payments and keep up their side of the mortgage agreement.

In terms of what lenders will accept in terms of ‘bad credit’, this can vary.

Some have very strict rules about what they won’t accept such as bankruptcy whereas others are more concerned with how long ago the bad credit issue occurred.

Every lender is different, and even if you’ve been turned down by one provider due to your credit history, another may still approve your application. 

What happens if you default on a Spanish mortgage?

The rules applied by the Bank of Spain make it far more difficult for banks to provide flexibility to borrowers who are struggling to meet their mortgage repayments. This can make it difficult to approach banks if you are having problems paying your mortgage.

This means that if you have 3 months of late on non-payments, Spanish banks are required to move a significant percentage of the original loan to their balance sheets.

The Spanish bank then has to go to court to take full ownership of the property (rather than the right to sell the property like they do in the UK.)

This means that you could potentially lose your property. As well as this, a Spanish bank can legally pursue a debtor in their country of residency, meaning that if you default on your mortgage, any assets you own in the UK could be taken away to settle the debt.

Can you exit a Spanish mortgage?

We have spoken to lots of borrowers who believe that as a non-resident of Spain they can just walk away from their Spanish Mortgage with little impact. This is not necessarily the case, and if you are in this position, you should take advice before leaving your mortgage.

In some cases, if you have a lot of equity in the Spanish property, it may be possible to negotiate with the bank to take the property back.

Are some Spanish properties harder to mortgage?

Traditional Spanish villas are highly sought-after because of their pretty yet modern design which often includes a flat roof.

If you opt for a non-Spanish lender, be aware that some may have an issue with flat roofing as this can be considered as “non-standard construction.”

This can be frustrating for buyers, with some non-Spanish lenders asking for larger deposits. That being said, these types of villas can have high demand, so some lenders may have no issue with lending for them.

How to get a mortgage in Spain

There are several possible financing options that may be suitable for you if you are considering getting a mortgage for a property in Spain. These include:

  • Using a Spanish lender
  • Using a non-Spanish mortgage provider who lenders internationally
  • Raise capital on a property you already own

In the following section, we cover a few of the pros and cons of each option.

International lender

Because Spanish lenders do not have access to your UK credit file, it can take longer for them to establish whether you pose a risk to them based on your credit history. This process can slow things down.

You may also require a larger, non-refundable deposit for a Spanish mortgage, so before you hand over or agree to any mortgage terms, ask your mortgage broker to thoroughly check your paperwork and contract.

On the more positive side, using an international lender may allow you to secure a lower interest rate for your mortgage in the right circumstances, so the higher up-front costs may be offset in the long run by lower rates.

Non-Spanish lender

There are no UK lenders offering mortgages in Spain. Some Foreign Banks based in Luxembourg, Monaco and Switzerland may consider the property in Spain, but their minimum purchase price is € 2 million and minimum loan €1 million. The latter is also subject the client’s overall personal financial profile.

To help avoid this problem, we suggest that you speak to a broker who has experience with managing Spanish mortgages as they will have a better understanding of property values in the area you are buying in, as well as a good idea of which lenders offer the cheapest rates.

Remortgaging

It may only be possible to remortgage a Spanish property you own for home improvements and/or possibly purchasing another property in the country.

Is there a Spanish mortgage calculator for non-residents?

You can find overseas calculators online which cater to non-residents or expats. They work in a very similar way to typical mortgage calculators as you enter the property value and term time, though many will take the higher interest rate into consideration.

Some calculators will ask if this will be your primary or secondary residence, as many lenders which cater for Spanish mortgages will require more deposit for a second home.

While these calculators can be a good starting point, they can only provide you with a rough idea of how much you could get, and at what interest rate. 

Can you get a buy to let mortgage for a Spanish property?

A landlord of a buy to let (BTL) property is usually reliant on the income from the rent charged to his/her tenants, to be able to afford the mortgage.

Buy to Let mortgages are therefore more difficult to obtain as lenders see the risk of defaults as being much higher.

That being said, there may be lenders who will consider lending in the right circumstances, and it will certainly help if you’re buying in an area that is known to be popular with renters.

Some may require larger deposits of up to 40% while others will require your income to be sufficient enough that you are able to afford your Spanish BTL mortgage without rental income, should you be unable to find tenants.

FAQs

Can I get a lifetime mortgage in Spain?

A lifetime mortgage is essentially a loan that is secured against your property.

Since 2007, Spanish lenders have reduced the range of mortgage products that allow the release of equity and most mortgages tend to be straightforward repayment mortgages.

However, if the equity is to be used for the repair of your property, you may be able to release funds.

Can I get a Spanish interest-only mortgage?

The majority of Spanish lenders only offer repayment mortgages, however, there are a handful of lenders in Spain that will consider loaning an interest-only mortgage in the right circumstances.

These can be harder to obtain but may be suitable option if you haven’t yet sold your home in the UK and wish to buy a property in Spain. Of course, this is seen as a riskier lending strategy, so many lenders will be reluctant.

What is the Spanish mortgage association?

This is a professional organisation made up of the biggest and most commonly used banks and lenders in Spain. The association is responsible for much of the legislation around transparency in mortgage lending, and plays a key role in protecting consumers.

Work with a Spanish speaking mortgage broker

If you want to take advantage of the lower interest rates available from both Spanish as well as UK lenders, seek the help of a mortgage broker who is fluent in Spanish as well as English. To save you time and money in translation fees, we can find you a specialist who speaks both languages fluently.

We also work with advisors who are knowledgeable about Spanish property law.

Find the best Spanish mortgage rates

Researching and comparing the current Spanish mortgage rates can be really time-consuming and stressful but the advisors we work with have access to hundreds of lenders including Spanish banks and can do all of this for you.

Using their own experience and knowledge of the market, they will dedicate their time to find you the cheapest Spanish mortgage deals and interest rates that may be available to you both in the UK and in Europe.

As for how to get the best rates on a Spanish mortgage, this comes down to many of the factors we’ve discussed throughout this article, including how much deposit you have, your credit rating, your income, your age and the property type. Make an enquiry for more information.

Speak to an expert on Spanish mortgages

If you have any more questions about getting a mortgage for a Spanish property and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0808 189 2301 or make an enquiry online and we’ll be in touch soon to match you with a suitable advisor.

The specialist brokers we work with have strong experience with the Spanish mortgage market, and have been successfully arranging mortgages for clients looking to buy property in Spain for many years.

Updated: 15th June 2020
OnlineMortgageAdvisor 2020 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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