Mortgage Types
The amount of financing and mortgages in Spain are unlike the different types of mortgages in other countries (such as savings, investment and repayment-free mortgages) Spain limits itself to providing mortgages on an annuity basis.
This means that your monthly payments consist of a portion of repayment and an interest component. At the end of the term, the full mortgage amount is then paid off.
In exceptional cases, a Spanish bank may also accept a partially repayable mortgage. This means that you only pay an agreed interest rate on the total amount borrowed. At the end of the mortgage term, original mortgage amount must be paid off. So this form of financing has risks!
Height and term of mortgage
Financing and mortgages in Spain generally have a maximum term of 25 years, for non-residents. The maximum term is up to an age of 75 (or 67 if a suitable pension is not available), even if you plan to continue working past age 67. This means that you must have paid off your mortgage in full before this time.
Of course, the amount of mortgage to be obtained depends on several personal factors.
1. Contribution of equity / maximum mortgage
For non-residents, the maximum mortgage amount for financing and mortgages in Spain is 60-70% of the foreclosure value, with the foreclosure value being determined by an independent appraiser often appointed by the bank. In many cases the foreclosure value differs from the agreed purchase price, in a negative sense. The lowest value is used to calculate the maximum mortgage. The buyer’s costs (transfer tax, land registry fees, notary fees etc.) in Spain are about 12-13% of the purchase price. Note, these are never co-financed! If you are a Spanish resident and have been living permanently in Spain for a longer period of time, a higher maximum mortgage amount may apply.
2. Your income
In order to meet the monthly interest and repayment obligations arising from taking out a Spanish mortgage, you must demonstrate that there is sufficient monthly
income is available. This income can come from permanent employment, pension or self-employment. Please note that Spanish banks are reluctant to deal with temporary employment (1 year contract etc) if the employment contracts were entered into outside Spain.
In the field of self-employment, banks have all kinds of requirements and needs, for example, the submission of annual reports audited by an accountant over several years.
About 35-40% of net income may be spent on mortgages and loans.
Income should be demonstrated through various evidence such as pay stubs, employer’s statement, annual statement, annual statements of bank accounts, periodic payment statements (including dividends, pensions, annuities and alimony) and tax returns.
NOTE: A regular and demonstrable income is even more important than sufficient equity.
3. Your current situation
Of great importance are your personal situation, family situation, number and age of children, current and future income, size of assets, wishes and expectations regarding further asset accumulation, (expected/required) withdrawals from assets, your spending pattern, age and the surplus value of your current home etc.
Keep in mind that in Spain the mortgage is attached to the house and not to the mortgagee. Mortgage details are listed separately in the title deed.
The cost of obtaining a Spanish mortgage
The cost of obtaining a Spanish mortgage is around 1 – 2% of the mortgage amount. These costs are part of the total “buyer’s fee”. The other costs are:
– Closing commission
– Valuation fees
– Land registry fees
– Administration fees
– Notary fees
– (transfer) tax
What documents, among others, should you provide.
Documentation required to obtain a Spanish mortgage
– A Spanish bank account
– NIE number
If employed:
– Copy of passport
– Pay slips (at least 3)
– Latest tax return
– Statement of bank funds
– Statement from employer
– Bank references
If independent:
– Copy of passport
– Copy of registration of Chamber of Commerce
– Latest tax return
– Account balance for the past 2 – 3 years
– Proof of salary
– Statement from accountant
– Statement from bank
If other income sources:
– Documentation (e.g., tax returns)
– Bank statements
