Financing / Mortgages

Financing / Mortgages


Different types of Mortgages

In contrast to the various types of mortgages in other countries (such as savings, investment, and interest-only mortgages) Spain limit themselves only to give mortgages on an annuity basis.
This means that your monthly payments consist of repayment and partly of interest. At the end of the term than the full mortgage amount is paid.

In exceptional cases, a Spanish bank may also accept a part interest-only mortgage. This means that you only pay interest on the amount which is borrowed and at the end of the mortgage term, the original mortgage amount still needs to be paid.
However, normally this mortgage is used only for larger projects, and generally does not apply on the private housing market.

Amount and duration of the mortgage.

The term of a Spanish Mortgage is maximum 25 years, in some cases 30 years where the mortgagee, should not exceed the maximum age of 70.
For example, someone who is 50 years will get a mortgage with a maximum maturity of 20 years which of course increases the monthly repayments.
This period may be extended when, for example, one of the children gets involved with the mortgage.

The maximum amount of the mortgage to be provided also dependents on several factors.

  1. Own resources / maximum mortgage
    For non-residents, the maximum mortgage is about 60-70% of the liquidation value, where the liquidation value is determined by an independent valuator appointed by the bank.
    The liquidation value may differ from the agreed purchase price and in this case the lowest value is always taken for the calculation of the maximum mortgage.
    The purchase costs , which are approximately 12-13% of the purchase price in Spain are never included in the financing.
    For Spanish residents who live permanently in Spain there may be a higher ceiling on mortgage lending.
  2. Your income
    To meet the monthly interest and repayment obligations arising from obtaining a Spanish mortgage, you must demonstrate that there is sufficient income available each month. This income may come from permanent employment, pension or self-employment.
    Regarding self-employment the banks have all kinds of requirements and needs, for example to submit annual reports audited by an accountant from several years.
    No more than 35-40% of net income may be spend on mortgages and loans.
    Acceptable proof of income sources include pay stubs, regular payment statements (including dividends, pensions, annuities, and alimony) and tax returns. Sometimes they also require a statement of the accountant or the home bank which proves that regular payments have been made into the account.
    If you do not have any proof of regular income, you can borrow up to maximum 40% of the appraised value within certain limits.
    NOTE: A regular income is even more important than having enough own resources.
  3. Your current situation
    Of great interest is your personal situation, family situation, number and age of children, present and future income, capital size , desires and expectations of further capital accumulation, (expected / required) withdrawals from the capital, your spending habits, age and the equity in your current home, etc.
    Please note that in Spain the mortgage is attached to the house and not to the mortgagee. Mortgage Data are reported separately in the title deed.

The costs of obtaining a Spanish mortgage

The total additional costs of obtaining a Spanish mortgage are approximately
2.5 – 3.5% of the loan amount and must therefore be calculated on top of the total purchase price. These additional costs are:

  • Closing commission
  • Valuation costs
  • Land registration costs
  • Administration costs
  • Notary fees
  • Tax

The required documentation for obtaining a Spanish mortgage

  • A Spanish bank account
  • NIE number

If employed:

  • Copy passport
  • Payslips (at least 3)
  • Latest tax return
  • Overview bank funds
  • Statement from the employer
  • Bank references

If self-employed:

  • Copy passport
  • Copy registration Chamber of Commerce
  • Latest tax return
  • Account balance from the last 2 – 3 years
  • Proof of salary
  • Statement from the accountant
  • Statement from the bank

Other sources of income:

  • Documentation ( for example tax return)
  • Bank statements

Please feel free to contact us without obligations to discuss your personal capabilities with us.