Getting a Spanish Mortgage – FAQs

If you’re thinking of using a mortgage to finance a Spanish property purchase, it’s a good idea to understand the basic principles and lending criteria for a Spanish mortgage application before you fall head over heels for your perfect Spanish property.

The Team at Total Buying Abroad have listed some Frequently Asked Questions around the topic of getting a Spanish mortgage

How much can I borrow when getting a Spanish mortgage?

Just like the Uk this depends on affordability and your personal circumstances such as your income and outgoings.Debts such as credit cards, car loans and other mortgagees will all be taken in to account.

How much deposit will I need for a Spanish Mortgage?

Typically, a Maximum LTV (loan to value) of 70% is requiredAn Example of this is. If the property is €100,000 you will need a €30,000 deposit (so €70,000 funded by the mortgage).You may find a lender who is willing to loan up to 80%. Banks will however prefer to lend at 60% LTV which is typically where you will find the better interest rates.

What interest rate will I pay on a Spanish mortgage?

This will depend on your personal circumstance but there are some fantastic interest rates available. Interest rates across Europe are at a historic low. Most lenders base their figures on the Euribor rate plus their rate (Margin) for example if the Euribor is at 0.2% and the lenders rate is 1.7% your rate would be 1.9%.Many lenders will charge you more interest the first year on a fixed rate and then drop down to a lesser variable rate after 6 or 12 months.

Should I get a fixed or variable rate Spanish mortgage?

This all comes down to personal choice there are some amazing deals out there for fixed rates over 5,10 and 15 years if you want peace of mind. You may want to choose a variable rate if you feel like you want to have the flexibility

Is there a minimum amount you can borrow when getting a Spanish mortgage?

Yes, and this often causes some issues as typically lenders will want to lend at least €50,000.This becomes a problem when the property is a lower value, as it becomes tricky to comply with both they LTV and minimum loan amount.

For example for a house price of €65,000, if the lending criteria is 70% LTV a deposit of 30% would be required. Once you deduct the 30% deposit of €19,500 this only leaves €45,500 which is less than the minimum loan of €50,000.

How long does the process of getting a Spanish mortgage take?

It can be done in as little as 4-6 weeks but this is the best-case scenario. We would suggest a more realistic time frame is 2-4 months from application to completion.Hold ups can occur at busy times of year such as the summer. Many professionals in Spain take the whole of August off which can delay the process.

Can you get a mortgage in principle on a mortgage in Spain?

Yes, a mortgage broker or lender will be able to give you an idea if you will be accepted and the amount available to you. This can be done without going through a full credit search and filling out a full application. This step is essential to know what value property you can search for and your budget.

Can I rent out my property in Spain with a Spanish mortgage on it?

Yes, most lenders will allow you to rent out your property however the rental income will not be taken into account when calculating how much you can borrow.

Do I need to instruct an independent Lawyer for buying a Spanish property?

Yes, it is essential if you are buying a Spanish property with or without a mortgage to instruct an independent English Speaking Spanish Lawyer. The meaning of independent is a lawyer not connected or recommended by your estate agent, developer or mortgage company. For more information on getting a lawyer in Spain please click here.

Are there redemption penalties to pay on a Spanish mortgage if I pay it off early?

Yes often there is a redemption penalty and it is important that you fully investigate how much and how long they apply for. Often they will decrease with time and are on a percentage basis.

If you would like further information about getting a mortgage to finance a Spanish property or details of a recommended Spanish mortgage advisor contact Total Buying Abroad on 01244 478 911 or email us at info@totalbuyingabroad.com. 

For further information and tips about buying property in Spain, contact us or download our free buying guide on the right hand side of this page.

TBA-RFX-guide-banner [LONG]

 

Article published: January 12, 2017