Mortgages for Spain are available in Euros and Sterling and are available on a repayment basis. There are limited schemes that cover interest only mortgages for a maximum of five years.
The maximum loan-to-value for a purchase is 65% for resale and new build properties or up to 80% if the property is to be the main residence. The maximum term of any mortgage is 35 years – up to the age of 70.
The minimum loan amount is €30,000 with no maximum.
Affordability and proof of income
There are no non-status/self-certification mortgage facilities available in Spain. Therefore all loans need to be supported by a minimum of proof of income.
If you are employed, you will need to provide your last three months' of payslips, your latest P60 and employer's reference and your last three months' personal bank statements.
If you are self-employed, you will need your last two years' audited accounts and tax returns and your last three months' personal bank statements.
A calculation will be used by lenders to decide whether you'll be able to keep up with your mortgage repayments. Your existing liabilities, such as your UK mortgage payments, loans and credit card payments will be taken into account, as well as how much you expect to pay for your Spanish mortgage.
The total amount must not exceed 35% of your monthly net income.
Need to know
Before you buy your property it's important to seek independent advice from an overseas solicitor.
You will need to have full title to the property on completion and have the appropriate documents including the 'nota simple' which is proof that the property is properly registered.
You will also need to obtain an N.I.E number (Numero de Identidad de Extranjeros). This must be applied for in person at any national police station in Spain and will be needed before you can open a bank account.
You should also take into account all of the fees you'll have to pay up. Spanish lenders usually charge around 1-2% of the borrowed amount as a completion fee and you will also be charged valuation fees.
In addition, you have two taxes and two fees to pay on the transfer of property. The two fees are for the notarisation of the deed and for its registry in the property registry. The two taxes are the transfer tax (called Impuesto de Transmisiones Patrimoniales) and a sort of capital gains tax on the increase in value of the land, usually called the plus val’a tax.
On top of this you will have to pay a documents fee, or stamp duty.
All fees will generally equate to around 10-13% of the property value so be sure to budget for this.
The completion of a Spanish mortgage takes place in front of an appointed Spanish notary and all parties to the mortgage, including the vendor, lawyers and a representative of the lender need to be present. However a power of attorney may be used to sign on your behalf for the mortgage and land deeds. A copy of this power of attorney will need to be presented to the lender in good time before completion.