Your definitive guide to your Spanish mortgage. How to get the best rates?
Spaniards and Foreigners are very active on the Spanish real estate market: both are buying the most since 2008:
Have a quick look at our 2-minutes 30 seconds video if you prefer videos, otherwise continue reading.
Before going into the details of how it works, you have to ask yourself those questions:
1. How to get the best rate on your Spanish mortgage as a foreigner, as a non-resident?
What is the ideal customer for a bank?
- Clients with a good professional profile
- Good Credit Report
- Affordability or debt to income under 35 %
- Good resale value of the property
- OECD countries
2. What are the different steps of the application process of your Spanish Mortgage?
1. What are the documents requested?
- Your Passport / ID for all the applicants
- Your NIE: “Número de identificación fiscal para extranjeros” or Foreign Resident’s Tax Number. How to get your NIE in Spain? What do you need to get it? Why do you need it?
- Last 3 paychecks with the contract of employment
- Proof of incomes/Contract
- A view on your assets and debts
- If it’s a new building: the “Deed for new building”
- The private sale-purchase contract
- If you have a mortgage at home, land registry information on the property and the mortgage
- If pensioners: Official proof of annual income.
2. If the bank gets formal pre-approval from its risk department, then they send the mortgage offer.
3. When the bank gets the client confirmation accepting the offer then they open the account and send account details.
4. The client must send an appraisal provision.
5. The bank orders the valuation and gets the approval of the mortgage. Then they send an official mortgage offer.
6. The bank arranges completion with the client or legal representative in Spain.
3. How much can you borrow for your Spanish mortgage?
For your second residence and as a non-fiscal resident, a bank will finance no more than 70 % of the value of your property. We call this the “Loan to Value” (LTV: i.e.: the amount of mortgage you can get divided by the value of your property before tax), but this % is only for good enquiry. This means that you would need to invest at least 45% of the property value with your own pocket.
How did we found this percentage? 45% = 100% + 15% costs for buying the property – 70% of mortgage!
If you go for a LTV lower than 60%, most of the time, the bank will show more flexibility. In 2016, Mortgages issued in Spain had a LTV of 64% and only 15% had a LTV higher than 80%. Have a look at our table with up to date information on Returns, mortgages and short term and long term rates on the Spanish market.
If you read our article on bank properties for sale in Spain, you will be aware that there could be exceptions to this… if you buy a property from a bank… 😉
4. What rate should you take for your mortgage? Variable or Fixed?
There are a wide range of mortgages available
Most of the banks provide a wide range of mortgage: variable, mixed and fixed rate. Due to the current rate environment, with short-term rates, Euribor, close to 0% and long-term rates very low, borrowers are taking the opportunity to get long-term rates at fixed prices. Before more than 90% of mortgages were issued as variable, nowadays this percentage is lower and 60% of the newly issued mortgages are issued with variable rates while 30% of newly issued mortgages are issued with fixed rates.
5. What are the current mortgages conditions in Spain?
Have a quick look at our article with the current mortgage interest rates in Spain updated monthly.
As of August 2019
- Mortgage cost in Spain: newly mortgages issued have an interest rate of 2.55%
- Duration of mortgages in Spain: an average length of 23 years.
- Loan to Value on new Spanish mortgage loans: 66% on average
- Percent of newly issued mortgages in Spain with a Loan to Value higher than 80%: 14%
- Average size of the newly issued mortgages in Spain: € 128,501
- Average monthly mortgage cost in Spain per €100.000: €450
Please note that the mortgage cost is an average. In general, foreigners will get higher rates due to the fact that their assets and incomes are not in Spain but in their home country.
It is always interesting to check the financing conditions for banks:
You can always find all those data up to date on our table: “Returns and mortgage rates in Spain“
Read more on that subject in our last paper: “The best mortgage rate in Spain in 2019”
6. Check our ultimate mortgage calculator to price your own mortgage
- What are your monthly payments?
- What is your mortgage schedule?
- What is your maximum property budget?
- How much mortgage can I afford in my Spanish home?
- How much money do I need to buy my Spanish second home?
- What is the minimum down payment you will need to have to buy your Spanish property?
7. What are your real estate investment returns in Spain?
As of October 2018
- Spanish real estate estimated Profitability (Gross rent + capital gain): +11.2%
- Gross rental income in Spain: +4.04%
- Real estate capital gain in Spain – Bank of Spain estimation: +7.16%
- Average mortgage cost in Spain: newly mortgages issued have an interest rate of 2.2%
You can always find all those data up to date on our table: “Returns and mortgage rates in Spain” and read our last article on the subject: “What is your return on your real estate investment in Spain in 2019?“
8. What is the activity on the Spanish mortgage market in 2018?
345.186 mortgages issued in 2018
During the year, we had more than 345.000 mortgages issued in Spain while more than 570.000 properties where sold. In 2017, the number of mortgages issued was slightly above 310.000, that is a 10% growth year over year.
Follow this link to read our detailed article on the mortgage activity in Spain.
9. Investing in Spain for yield? Buy to let?
Our best tip: Don’t forget to take the mortgage when you buy, not after, if you want to reduce the taxes on your rental income thanks to your mortgages costs.
10. Looking for a qualitative new build project from reliable developers?
Our other resources on that subject
Here is our FAQ on mortgages in Spain
Can I get a Spanish mortgage?
It is very easy to get a mortgage in Spain. What are the documents requested?
1.Your Passport / ID for all the applicants
2. Your NIE: “Número de identificación fiscal para extranjeros” or Foreign Resident’s Tax Number.
3. Last 3 paychecks with the contract of employment Proof of incomes/Contract
4. A view on your assets and debts
5. If it’s a new building: the “Deed for new building”
6. The private sale-purchase contract
7. If you have a mortgage at home, land registry information on the property and the mortgage
8. If pensioners: Official proof of annual income.
Read our detailed article on that
Can foreigners get a mortgage in Spain?
Yes, foreigners can get a mortgage up to 70% of the Value of a property.
How long does it take to get a Spanish mortgage?
About 6 weeks. Although, we have to say that since the new law got into effect in August 2019, there is a new 'cooling-off' period of 10 days, so this increases a little bit the timing for getting a mortgage.
Do I need a Spanish bank account to buy a property in Spain?
The obvious answer is yes. You want to finance a property in Spain, you will have taxes, utilities, ... Get it right away. In order to open your bank account, you will need a NIE, see our news on that.
How much can I borrow for a mortgage in Spain?
For your second residence and as a non-fiscal resident, a bank will finance no more than 70 % of the value of your property. If you include 15% of costs, this means that you would need to invest at least 45% of the property value with your own pocket.
What are the costs of buying a house in Spain?
The cost of buying a resale or a newbuild in Spain is between 12 and 15%. Please read our full article on that subject.
What is the interest rate in Spain?
As of October 2019, the average mortgage has an interest rate of 2.50% (vs 2.51% last month). The lowest rate ever is the current rate 2.50%! Read our dedicated article on that subject with the last available data.
Are you looking for a competitive pricing from one of our local partners?
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Do you want to read more?
Check our article with the last update on the best mortgage rates in Spain in 2020, with the official statistics from the INE, the Spanish statistic office.
Have a look at our reports:
If you want to find a bank in Spain, here is the official list from the bank of Spain with all the financial registered institutions.