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Mortgage Advisor & Director
Mortgages in Spain
Spain is a popular destination for many people looking to buy a holiday home or retirement home. It's easy to see why - many of the home comforts of the UK can be found in Spanish supermarkets, many of Spain’s busiest airports have several flights a day forwards and backwards to the UK, and you can't ignore the appeal of the long, warm summers. However, buying property in Spain is a very different process to the UK, and it’s highly recommended to take independent legal advice.
Why do I need a mortgage broker for a Spanish mortgage?
Even more so than in other European countries, speaking to a broker for a mortgage in Spain will help you secure the best deal. Lenders in Spain can operate at the discretion of local branch managers in terms of who they accept and what rates they will offer, and these decisions are made on a personal level. Two different branches of the same high street lender could offer you completely different rates. Shopping around for the best rates can be both confusing and time-consuming - a broker will be able to cut through this to find you the best rate possible.
What types of mortgage are available in Spain?
Most mortgages in Spain are variable rate mortgages. Fixed rate mortgages are available, but they are less popular.
Almost all mortgages are repayment mortgages - you will struggle to find any interest-only mortgages.
Lenders in Spain track their interest rates in line with the Euribor. This is a rate set by the European Central Bank (ECB) that determines how banks within Europe lend to each other. In mortgages, it’s used similarly to how UK lenders use the Bank of England base rate to guide their SVR (standard variable rate). Interest rates for mortgage products are usually expressed as “Euribor +2%”.
The type of property you buy will also affect what mortgage deals you are offered. You will likely be offered better rates on a permanent home than on a holiday home. This is because if you were to run into financial trouble, you’re more likely to default on payments for a holiday home than for your main residence.
Lenders will often require that you take out different financial products with them at the same time as your new mortgage; some as optional extras, others as a condition of the loan. Taking out more of their complementary products may secure you a better discount on interest rates. You will almost certainly need to open a bank account with the lender as a condition of the mortgage. They may also require that you take out home insurance and/or life insurance with their preferred insurers.
How much can I borrow?
The amount you can borrow will depend on your legal status in Spain.
- If you are a non-resident, and you pay tax to your home country (e.g. the UK), the maximum you can borrow will be 70% of the value of the property. Some banks will only offer up to 60%.
- If you are ordinarily resident in Spain, and paying local taxes, you will be able to borrow up to 80% of the value of the property.
If you are buying land to build your own property, you will need to seek a “construction mortgage”. This is a more complicated process, but you will generally only be able to borrow between 60-70% of the value of the land and construction costs.
If you are buying a commercial property, you will only be able to borrow up to 50% of the value of the property. Lenders will need to see your business plan, any experience you have of running a similar business, and where relevant, the accounts of any similar businesses that have operated on the premises.
What fees can I expect to pay on a Spanish mortgage?
There are many fees associated with buying property in Spain. As a rough guide, you should budget around 10-13% of the value of the property on additional costs. These can include:
Valuation fees. The lender will require that a third party value the property, and will bill you for the cost. This can be between a few hundred and a thousand Euros.
Opening Fees. This is similar to the Arrangement Fees seen in the UK. It is usually charged between 0.5% and 2% of the value of the property.
Land registry fees
Notary fees
Deed arrangement fees
Mortgage Subrogation Fees. This is only applicable if there is an outstanding mortgage on the property and it is transferred to the new owner.
What else do I need to be aware of when buying property in Spain?
You will need to acquire an N.I.E. number (Número de Identidad de Extranjeros - Foreigner Identification Number). You can apply for this at any national police station (it doesn’t have to be in the same town you are buying the property). You will need this number even after the property purchase for things like setting up electricity contracts and local taxes.
When you complete on a property in Spain, you need to do so before an appointed notary. All parties (or representatives of those parties) need to be present, including the vendor, the lender and the buyer.
What is a 'nota simple'?
A nota simple is a property report from the Spanish Land Registry. It’s a legal document that contains an accurate and verified description of the property.
The document confirms who owns the property, the legal boundaries of the plot, any debts associated with the property, and the official usage status (e.g. residential, commercial etc). It will also tell you if anyone else has access to the property, including rights of way or roads, and whether the owner of the property is subject to pay any local community fees.
You can download a copy of the nota simple from the property title registry office as long as you have certain identifying information, such as the full name of the current owner and their ID number.
You will need a copy of the nota simple before the lender can complete their valuation.
The lender will look for certain information on the nota simple in deciding whether to accept your mortgage application. For example, if the property is described as “rustic” (rustico/rustica) they are unlikely to lend to you. It will also confirm that the property is habitable (vivienda).
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
