Spanish Mortgage Guide
A Spanish mortgage is the normal way to finance a property in case you do not have the full amount of the purchasing price.
The mortgage is a contract between the mortgage lender and borrower to assure the borrower will repay the debt. On mortgaging a property, the loan (home mortgage) is secured on the property.
In Spain the current mortgage rates are rather interesting, and banks have special products designed for non-resident borrowers. Your mortgage broker will check which mortgage suits you best. Spanish mortgage
Your Spanish mortgage will be filed at the Spanish Property Registry.
Documentation required to apply for a mortgage.
Basic requirements;
Completed mortgage application form
Original and a copy of your passport
Original and a copy of your residence card or NIE number
Copy of property “Nota simple” (Title deed extract) from the Land Registry. List of assets (other houses, cars, shares etc.)
Employees, additional information;
Original and a copy of your last three payslips.
Copy of last income tax declaration form, (P60 in the U.K.).
Self employed, additional information;
Copy of your tax returns for the last two years
I.V.A. (V.A.T.) and income tax returns
Balance sheets
Last three bank statements
What is it necessary for a Spanish mortgage to have full legal effect?
Mortgages must be formalized in a public deed of mortgage before a Public Notary .
The property must be registered at the Property Registry with the name of the owners whom the mortgage is given to.Spanish mortgage
Special cases.
You may find that the property of your dreams, that you are willing to purchase, is already mortgaged.
You can do either of two operations: the subrogation and the novation of the mortgage.
* The novation (novación) entitles you to accept the existing Spanish mortgage and renegotiate with the lender better conditions.
*The subrogation (subrogación) entitles you to change the actual mortgage lender for another, and obtain a new mortgage loan on the property, with better interest rates.
These operations are subject to the Register and Notary costs.
The mortgage interest rates. Spanish mortgage
Fixed rate mortgage:
The interest rate is fixed at the start of the mortgage. The periodic amount for the payment of principal and interest will not change during the term of the mortgage.
Keep in mind that with this type of interest we are aware of the amounts we will be paying until the mortgage term is finished, however, we don't know whether the interest rate level will be reduced in the market or not.
Adjustable mortgage rate:
The interest rate on your Spanish mortgage will be adjusted up or down according to current interest rate levels. The periodic amount for your main and interest payments will go up or down with these rate changes. Spanish mortgage
The initial interest will be initially lower. The mortgage company normally uses this tool to make the mortgage offer more attractive, later on this interest may convert into an excessively high interest.
Costs and legal fees.
If you intend to mortgage a second hand property, be aware that you should face costs as follows:
Valuation of the property;
Request of extract (Nota Simple) issued by the Spanish Property Registry, which shows the latest recorded details of any charges on the property.
Bank mortgage opening fee;
It shall be paid when signing the deed. This fee varies depending on the lending bank you deal with.
Theoretically this commission serves to cover the costs the bank has incurred for studying the concession of the loan to the borrower. Some banks do not charge this fee.
Stamp duty;
or 'Impuesto de Actos Jurídicos Documentados' 0.5%. It must be paid when a notarial document is signed.
Notary and Registry;
These fees vary depending on the guaranteed capital of the mortgage.
Insurance;Spanish mortgage
The banks normally require the borrower to contract, at least, a fire insurance to protect its interest until the loan is repaid. The insurance fee must be paid when you sign the title deed.
Management of the loan binding offer.
Once you have decided which Spanish mortgage better suits you, the mortgage lender will analyze your current income and basic credit history situation in order to qualify you for a maximum loan amount.
If the mortgage lender decides to give you the loan requested, he will issue a mortgage quote which includes the loan conditions. Normally you will be given a term of ten days to accept or reject this offer.
What must this offer contain? Interests rates, fees, payment term and the interest on delayed payments.
Formalization of a mortgage.
Your Spanish mortgage is formalized at the signing before the Public Notary. Both parties must be present at the signing of the deeds, and the Notary shall make sure that the borrowers understand everything they are signing.
The borrowers should examine the mortgage conditions, especially when the mortgage interest rate is variable. The bank will keep a true copy of the deed to be filed before the court in case the borrower does not pay the mortgage.
If you need a mortgage calculator, click here.
Spanish mortgages - What's new?
Over the last twelve months, fierce competition between lending banks has led to better than ever mortgage products being available for both resident and non-resident buyers. In particular, banks which previously appeared to make the mortgage process for non-residents a long and arduous task, now realise that they have been missing out on a lucrative part of the market. Most banks have reviewed their service and are now encouraging non-residents with vastly improved products.
As well as the traditional 'capital and interest' mortgage, we now see interest only mortages becoming available along with attractive fixed interest rate options. Upper age limits have been increased, as has the loan to value amount. Life assurance cover is often not compulsory and redemption penalties have been reduced or ridden of. Also, loans for construction or purchasing 'off plan' have become more flexible. Several lenders have schemes to enable the purchase of a new property prior to the sale of your current home.
If you are considering purchasing a property, and need an initial or 2nd mortgage, then get advise on all of the options currently available, and select the most adequate mortgage offer. The trend for new and innovative, Spanish mortgage products should hopefully continue, bringing more variety, better terms and increased efficiency - all good news for you, whether this is your first or second mortgage.
Long term Rental Option
If you are unsuccessful obtaining a mortgage, you may want to rent a place long term.
Long term rentals in Spain can range from as short as 3 months and can be renewed every year on an 11 month contract. The demand for Costa Del Sol long term rentals is on the up as individuals and families planning a move to Spain's southern coast use a long term rental to 'try before they buy' and experience life on the Costa Del Sol before making the move more permanent. Once installed, it is easier to continue investigating the options of buying.
Click here for more information on Long Term Rentals Costa del Sol.
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