Spain Mortgage Guide
Obtaining a mortgage in Spain has now become increasingly difficult in recent years, with banks becoming more stringent with their lending policies. Purchasing a property in Spain was at one time the most common reason for a Spanish mortgage. However, due to the recent economic climate, this has now in fact moved aside and taken second place to remortgages and equity release. During the boom times of the Spanish property market it was usually possible to get a mortgage based on the Loan-To-Value or LTV, these days most banks in Spain will only lend according to the Loan-To-Cost or LTC. What this means is that lenders will now take the purchase price over and above any type of valuation figure.
The average maximum LTC or LTV in Spain is currently low at around 70%, however it is still possible to purchase properties that have a higher loan to value compared to the purchase price of the property. These are possible on properties the banks themselves are selling. Many banks have repossesed properties on their books and will loan at a higher ratio.
Spain Remortgage and Equity Release
There are numerous Spanish property owners who are planning to refinance their portfolio, either to release capital or obtain a better interest rate. It has often been the case with mortgage lenders in Spain that they refuse to decrease their mortgage interest rates in line with the fall in the Euribor. However, many property owners have successfully sought legal advice, and the lenders have reduced their interest rate to a fairer’ level, given the Euribor rates.
Equity Release and Life Time mortgages were once a very common and useful product for property owners in Spain who where either in retirement, or just wanted to release capital. They allowed the owner to either remortgage at a higher borrowing level, or pass the property to the bank in exchange for a cash lump sum with the opportunity to stay in the property for the rest of their lives. Unfortunately these products are becoming less and less common in Spain as banks tighten lending requirements, and prefer to opt for shorter term mortgage debt, as opposed to lifetime mortgages where there could be no return for the bank for decades.
Spain Property Purchase Fees
On average, the cost of buying a property in Spain will be somewhere in the region of 10 to 15% of the purchase price, this will of course depend on the complexity of the procedure and the particular region of Spain in which you are buying a property. We have listed below what costs are included when buying a property in Spain and what is required to obtain a mortgage in Spain.
Notary fees are established by law and depend on the mortgage value, the registry fee/land registry is usually 0.25% of the value of the mortgage, the property tax is 7% of the declared purchase price, the cost of the Property valuation depends on the value of the house which is usually from 0.80 to 1.5%, Spanish lenders will charge you an opening fee of between 1 and 2%, stamp Duty (AJD) is paid to the government and is calculated as a percentage of a Spanish mortgage (between 0.85% and 1.75%).
Standard Non-resident Document Requirements for Spanish Mortgages
Employed Applicants must present 3 month’s payslips, their P60 document, 3 month’s bank statements, employer’s reference and a copy of their Passport.
Self Employed applicants must bring with them a Self assessment tax return, Accountant’s reference, 3 months bank statements and a Copy of their passport.
Resident Document Requirements
Employed applicants must present their Contract of employment stamped by social security, Vida Laboral, Renta, 3 month’s nominas and a Bank reference.
Self Employed applicants need to take their Certificate of Autonomo or Escritura for SL, Gestor reference, 1 to 2 years Profit and Loss accounts, Renta, Last 3 quarterly IVA returns and 3 months bank statements.