Mortgages in Spain
Find out what lending criteria and deposit requirements you may have to meet when looking to get a mortgage for a property in Spain.
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If you are looking to purchase a property in Spain, you may need a mortgage to buy your dream home in the sun. It’s good to know how much you can borrow, and from whom, prior to beginning your search.
We identify borrowing amounts here, as well as what lending criteria and deposit requirements you may have to meet, before outlining how to get a Spanish mortgage as an expat. We also explore how buy-to-let properties work in Spain, and whether remortgaging is different from the UK too.
Can UK residents get a mortgage in Spain?
Yes, absolutely – though currently no UK lenders offer mortgages for a property purchase in Spain. Spanish lenders may accept applications from foreigners, though some may limit how much you can eventually borrow – depending on what country you are from. Using the help of a Spanish mortgage broker can be beneficial as they’ll have in-depth knowledge of this area of the market. You would also benefit from instructing a specialist lawyer to help you through other aspects of the purchase as there are many differences between UK and Spanish property law.
If you do secure a mortgage from a Spanish provider, it will usually have a variable interest rate. You may find fixed rate deals, but if not, your product will typically be linked to Euribor (Euro Interbank Offered Rate). These mortgages are generally repayment products too. It’s very rare to find an interest-only mortgage product from a Spanish provider.
Once you have taken out a mortgage, lenders will usually want you to have a bank account with them (so if you have a Santander mortgage, you’ll need a Spanish Santander bank account). Plus, lenders often want you to take out a home insurance and/or a life insurance policy with them too.
Other mortgage options
Alternatively, you could look at borrowing from a foreign lender who offers mortgages for Spanish properties. There are a number of banks in Luxembourg, Monaco and Switzerland but they typically only extend loans of at least €1 million for properties that are worth more than €2 million.
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Rules, lending criteria and deposit requirements for Spanish providers
In general, Spanish providers have similar approaches to applications as UK lenders. However, due to being an overseas applicant, you may find that for some of their eligibility criteria, they are more stringent in their requirements, which we explore below..
Rules and affordability
As with UK mortgages, Spanish lenders will conduct an affordability assessment to help determine how much they will extend. They often calculate a debt-to-income ratio too, to ensure that your regular outgoings don’t go above 35-40% of your net monthly income after your mortgage payment has been made.
To be eligible, you’ll need to meet a number of requirements set out by the specific provider you are using. They are usually very much alike to the criteria used by the majority of UK lenders on their standard mortgages:
- Age – Mortgage providers will often have a lower and upper limit for the age of applicants. It will usually be between 21 and 70, though if you are outside this range, a mortgage broker may be able to help you find a suitable alternative.
- Credit history – Spanish lenders may be hesitant to approve applicants with bad credit, particularly if they are within the last six years. However, some are more flexible than others. Head to our credit reports hub to download your credit files for free if you’re concerned about being declined on these grounds.
- Type of property – Buying a holiday home, as opposed to a property you are going to live in full-time, is viewed as riskier. As a result, you may find less lenders happy to extend you a loan for this type of property, or fewer lenders which will offer you preferential rates.
Buying a home abroad in Spain usually necessitates a bigger deposit than you’d be asked for on a standard residential purchase in the UK. You can expect lenders to require a deposit of 30-40%, though a broker could help you find a provider who accepts less. You may find that you can borrow at a higher loan-to-value ratio if you work and pay taxes in the country.
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How to get a mortgage in Spain
To ensure you get your Spanish application off on the right foot, try following these steps:
Collate your paperwork
Mortgage applications are made a lot more efficient if you have all your paperwork ready before you make a start. Specific to Spanish applications, you’ll need to give your número de Identificación de Extranjeros (NIE). This is a tax identification number for foreigners. You’ll also need to provide other standard documentation as evidence of your address, your income, your nationality, your deposit source and amount, in addition to bank statements for an affordability assessment.
Check your credit rating
As in the UK, bad credit is not automatic grounds for refusal for Spanish lenders, but knowing what’s on your credit history is beneficial. So, download your credit reports prior to your applications. Doing so can give you the opportunity to rectify any erroneous records. Or, if your record is correct, you’ll know which providers to avoid given your past issues.
Speak to an expert in Spanish mortgages
Seeking the help of a specialist Spanish mortgage broker can prove invaluable for your application. They have a wealth of knowledge and experience in that specific market, so they can better identify the most suitable mortgage provider for you – and more quickly too. They do so by using their knowledge to balance all the factors in your financial situation – such as your income, your credit history and your deposit. That means you will get the best deal possible for your circumstances – maximising borrowing amounts while minimising repayments.
Make an enquiry online so we can match you with a suitable advisor.
How much could you borrow?
It will entirely depend on the lender you choose and their lending terms. Each Spanish provider has their own way of calculating lending amounts, so it’s difficult to say definitively how much you could borrow. However, you can use our calculator below to give a rough guide:
Mortgage Affordability Calculator
Our affordability calculator can tell you how much you can potentially borrow from a mortgage lender. Simply enter your total household income below and our calculator will do the rest.
You could borrow up to
Most lenders would consider letting you borrow
This is based on 4.5 times your household income, the standard calculation used by the majority of mortgage providers. To borrow more than this, you will need to use a mortgage broker to access specialist lenders.
Some lenders would consider letting you borrow
This is based on 5 times your household income, a salary multiple you might struggle to qualify for without the help of a broker. This income multiple is not widely available to customers who are applying directly with a lender.
A minority of lenders would consider letting you borrow
This is based on 6 times your household income, a salary multiple you will struggle to get without a broker. Six-times salary mortgages are usually only available under very specific circumstances.
Get Started with an expert broker to find out exactly how much you could borrow.
Which lenders offer Spanish mortgages?
Santander and CajaSur are two options for banks in Spain you could approach. However, there are many more, all of which have their own lending requirements. To ensure your application is successful, it can be helpful to seek the help of a broker who will know which products you are eligible for and with whom.
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How does buy-to-let work over there?
Spanish residential mortgages do not generally include terms and conditions which prevent renting out properties. As a result, Spanish lenders don’t offer buy-to-let products like UK lenders do. It means that you won’t be subject to the higher interest rates that these loans attract in the UK.
However, the rate you finally secure could still be higher if you are buying a property in Spain, solely to rent it out. Your outgoings will be higher due to having a second property and presumably, therefore, a second mortgage. A lender’s affordability assessment may then find that you are a riskier candidate and extend you a loan with a higher rate to offset that risk.
Remortgaging a Spanish property
At some point, you may want to remortgage to take advantage of lower interest rates or to raise more finance. That’s possible to do in Spain through a couple of options. Firstly, you could cancel your current mortgage and take out another one. This can be expensive and attracts several penalty charges and fees. Plus, you have to go through the whole process of applying for a mortgage again, which can incur further costs.
Or, you could transfer your loan to a new lender. This is a relatively new aspect of the Spanish mortgage market, so not all lenders offer or accept transfers. It can mean, though, that it’s possible to take advantage of a lower rate elsewhere and that you are not charged some of the fees a new mortgage application would attract.
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:
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.
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.
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.
Speak to a broker who specialises in Spanish mortgages
Knowing that you are applying for the most suitable Spanish mortgage product for you, with the right lender, is tough to do on your own. However, doing so is key to securing a rate that you can afford, for the amount you need, to buy your dream Spanish home.
A broker can be your best bet for securing a product that works for you. They’ll take into consideration every factor in your financial situation and wider circumstances, plus what you need from a mortgage provider, to suggest the best lender. They’ll determine which provider offers you the best terms and conditions whether you want a mortgage for a holiday home, a property you’ll live in full-time, or if you need to remortgage.
Our free, no-obligation broker matching service can put you in touch with an expert in Spanish mortgages. Call us on 0808 189 2301 or make an enquiry online and we’ll be in touch soon to match you with a suitable advisor.
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Maximise your chance of approval with a specialist overseas broker
It depends. There will be so many variables in your application which can either speed up or slow down the process. If you are applying while in the UK, you’ll find the procedure far more efficient and stress free in general if you work with a broker.
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.
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