Financing your property purchase in Spain

Last updated on October 28th, 2019 at 04:11 pm.

So you have found your ideal property in Spain. It’s the perfect time to buy and the exchange rate is right. However, it’s a little more than you have available in cash at the moment. How do you go about taking out a mortgage in Spain?

Until recently, mortgages in Spain were extremely difficult to come by. Following the property boom and crash, banks were forced to review their lending policy with the result that some were hardly lending at all. They went from handing out Spanish mortgages left, right and centre to pulling the shutters down, firm and fast.

Now, the situation has eased slightly and mortgages are available provided you can show that you are financially able to honour your obligations. Even before approaching the bank, however, you should be sure yourself that you can afford it and that it is right for you, now and in the future.

Applying for a mortgage

You can apply for a mortgage in Spain in much the same way as you would do in another country. You will have to contribute a large deposit of at least 30 to 40% of the total price of the property. The mortgage lender will expect you to prove your income to ensure that you are in a position to pay. A mortgage cannot be taken out for longer than 30 years and must be repaid by retirement age.

As well as the additional cost you will incur by paying your Spanish mortgage there will be an administrative cost that’s applied by the mortgage lender. You must make sure that you are clear about how much this will be as it is often up to 2% of the mortgage itself.

Key steps to signing a Spanish mortgage

Once you have decided you would like to apply for a mortgage and how much you need to borrow then the following process will begin:

You will need to provide basic information to the mortgage provider. This includes:
1. The amount you would like to borrow
2. How long you would like to borrow it for
3. Your age
4. Your annual income
5. Your monthly expenditure on other mortgages or loans
At this stage it isn’t necessary to provide them with the proof, just the details for them to work on.
The mortgage provider will then review your details and match them against their minimum criteria. If this is met, they will provide you with an initial, provisional offer and you will need to supply proof of income if you wish to go ahead.
You can expect it to take between one and two weeks for the income information to be approved. Once cleared, the property must be valued by the bank to confirm the purchase price
Once the valuation has been made, the mortgage is ready to be signed at a Spanish Notary. This must take place within the next four weeks for the mortgage still to be valid. After this time, updated income information may be needed.

The signing of the Mortgage Deed in Spain takes place at the same time as the signing of the Title Deed. After the signing, the Notary will send an electronic version of the Title Deed and the Mortgage Deed to the Land Registry.

Cancelling a mortgage

If you find that at some point in the future you are in a position to pay off the mortgage, you should first check to see if there is an early repayment charge. Then the total needed should be transferred to the bank account and the bank informed that you wish this money to be used to repay the mortgage.

Once this has been completed there is an additional second step you must do. You will need to inform the Spanish Land Registry as if this doesn’t happen then it will still be registered on the Deed that you owe money against the property.

In order to be sure that the records are in order, you need a representative from your mortgage holding bank to sign the Mortgage Cancellation Deed at the Notary Office. This can then be sent to the Land Registry.

A good time to buy

The fact that mortgages are more available has helped a blossoming property market. With low interest rates and good exchange rates on most currencies, it has made 2015 in Spain an even better time to buy.

Caroline Clinton