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Spanish Mortgages
THE
SPANISH BUYING PROCESS
At present, virtually all mortgages in Spain are full status mortgages and therefore proof of income and liabilities will be needed. Mortgages can be obtained for the purchase, renovation and construction of a property. However, bear in mind that unlike in Britain, stage payments for an ongoing building project are not commonly available in Spain.
Mortgages are available from most of the Spanish banks and savings banks and also from British lenders based in Gibraltar and are attached to the property and are written into the title deed (escritura) and not to the person who takes out the mortgage. This is a big difference to the system in the UK and is therefore one of the good reasons to always use a reputable lawyer (abogado) when transacting any property deal here in Spain. It also means that in Spain you cannot usually obtain a mortgage in principle before you have actually reserved a property.
Spanish mortgages are mainly of the capital and interest repayment type, although more lenders are now entering the field of interest only mortgages with varying mortgage terms. Mortgage terms are available from 5 – 30 years and most lenders will require that the loan be repaid by the age of 70. Some lenders may require a suitable life assurance policy to be effected as a condition of the mortgage. As Independent Financial Advisers, Wallace Church & Associates S.L. can arrange these types of policies for you, either onshore with a UK provider, or offshore.
Spanish lenders will only lend against an applicant’s proven income from whatever source, but will not take into account other assets as collateral. The maximum that can be borrowed is governed by the size of the proposed monthly repayment in relation to your income. This should not, as a general rule, exceed 35% of your net monthly income.
The lender will also require you to take out an appropriate buildings insurance policy, which can be effected through the lender, or independently. Wallace Church & Associates S.L. can arrange very competitive cover, with all policy documentation and claims handling in English.
Different lending rules still currently apply to mortgage applicants in Spain. As a general rule a Spanish resident can obtain a maximum loan of 80% of the lender’s valuation on the property, whilst a non-resident is limited to 70% loan to value. However, lenders are now beginning to show more flexibility in this regard.
On purchases of land, the maximum borrowing permitted will normally be around 60% of the valuation. This will also apply to country properties and fincas built on land classified as “rustica”. On land that you may already own outright and where you now wish to build a home, provided that the project has been approved by a qualified architect and the appropriate building licence has been obtained, you may obtain a mortgage of up to 60% of the valuation of the completed project (building and land combined). This figure is usually more than enough to cover 100% of the building costs of a normal residential construction. However, it should be noted that a lender will not finance any construction on land that already has a mortgage attached to it.
Remortgages on a property are not
common in Spain but are available from a few lenders. However, in
these cases the maximum loan to value is not likely to exceed 60%.
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Need a mortgage in Spain?
