How to get a mortgage in Spain: Everything you need to know

Looking for a place in the sun? Arranging a mortgage in Spain isn't as complicated as you may think.

If you’ve got your eyes on a holiday home or you’re dreaming of moving to Spain, there’s arguably never been a better time to arrange a mortgage there.

Property prices and mortgage rates have remained favourable ever since the Spanish property crisis, and the Spanish government has made it simple for overseas investors to snap up buy-to-let properties.

The process of arranging a mortgage will involve a few additional steps and a sizeable deposit. Yet, other than that there’s little stopping you from buying a home in the sunny climates of Spain.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Should I use a Spanish mortgage lender?

There are a few British lenders that offer mortgages on Spanish properties, but you may get a better deal by using a Spanish mortgage lender. It’s not clear-cut though, because there are many differences between the processes and the fees you’ll pay. Here are the pros and cons of choosing a Spanish mortgage lender.

Pros

  • A bigger choice of lenders, leading to more competition and lower rates across the market.
  • Most Spanish lenders offer tracker mortgages, based on the Euribor rate, which has been extremely low for many years.

Cons

  • You’ll have to obtain a Spanish NIE tax identification number, which can sometimes take weeks.
  • You’ll need to pay for documents to be translated (unless you speak fluent Spanish).
  • Spanish mortgage providers aren’t regulated by the Financial Conduct Authority (FCA) , nor part of the Financial Ombudsman Scheme (FOS).
  • Haggling over the mortgage rate is far more commonplace in Spain. Unless you have a solid understanding of the Spanish property market, it’s highly recommended to enlist a mortgage broker to do this for you.

Other than these key differences, the mortgage application process when using a Spanish mortgage provider will be similar to buying a property in the UK. You’ll go through the same affordability and credit checks in order to be approved. Once you are, the path to completing your mortgage (conveyancing, property surveys, etc) will be more or less the same.

How much deposit do I need?

If you’re planning to live in the property, you can expect to pay a minimum deposit of around 20%.

If you’re looking to invest in a buy-to-let property, the minimum deposit will be significantly more (just as it is in the UK). You can expect to have to stump up 40% of the property’s value.

What fees will I pay?

It’s often recommended to have 15% of your mortgage value spare to fund various charges and fees.

  • Mortgage deed duty (1.8% of your mortgage).
  • Bank arrangement fees (typically between 1% and 1.5% of your mortgage).
  • Administration fees (for document signing and translation; up to 0.5% of your mortgage).
  • Valuation fee (typically between £100 – £300).
  • VAT (10% of your property price – only applicable if buying a new-build property).
  • Sales tax (5-10% of your property price, depending on location and type of building – only applicable when not buying a new-build property).
  • Mortgage broker fee (between 0.5% and 1% of your mortgage).
  • There may be other local charges to consider depending on your location.

If you live in Spain for more than 183 days per year, you’ll be classified as a “resident for tax purposes” and responsible for capital gains tax, investment taxes and wealth taxes. Even non-residents must pay Spanish income tax on assets they own within the country.

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