Mortgage in Spain

The rules for taking out a mortgage for foreigners in Spain are similar to those for nationals, but there are a few additional requirements and formalities. Mortgages in Spain are granted to both EU and non-EU citizens, but terms and conditions can vary depending on the resident’s status, creditworthiness and bank. Here are details of the rules, costs and percentages:

1. Pre-requirements for foreigners:.

• ** NIE number (Número de Identificación de Extranjero):** This is the identification number for foreigners, which is necessary for all formalities in Spain, including taking out a mortgage.
• Own contribution:** The required own contribution for foreigners is usually higher than for Spanish citizens. Banks often expect between 30% and 40% of the value of the property as an own contribution.
• Financial documents: Banks require financial documents such as income certificates, bank statements for the last few months, PITs, employment contracts, and credit reports.
• Credit history:** For foreigners, a positive credit history in the country of residence is particularly important. Banks may also check for arrears on other loans.

2. Mortgage types:.

• Variable-rate loans (hipotecas a tipo variable):** The interest rate is based on EURIBOR plus a margin set by the bank. It can change every 6 or 12 months.In recent years, the average interest rate has ranged from 2.5% to 4%.
• Fixed-rate loans (hipotecas a tipo fijo): The interest rate is fixed for the entire term of the loan, which can provide greater certainty about future costs. The interest rate on these loans varies from 3% to 5%, depending on the term of the loan and the customer profile.- Mixed loans: They combine features of both of the above types – for example, the first few years may have a fixed interest rate and the following years a variable rate.

3. Mortgage-related costs:.

• Banking fees: May include an application fee (1%-2% of the loan amount) and a loan opening fee.- ** Notary costs:** In Spain, all property purchase transactions must be approved by a notary.These costs are usually between 0.5% and 1% of the value of the property.
• Privatisation tax (Impuesto de Actos Jurídicos Documentados – AJD): This tax ranges from 0.5% to 1.5% of the value of the mortgage, depending on the region.
• Cost of registration in the Land Registry:** This usually ranges from 0.1%-0.3% of the value of the property.
• Cost of insurance: Banks may require life insurance and property insurance as a condition of the loan.

4. Credit terms:

• Lending term: The standard loan term is 20-30 years, but this may be shorter for older people or those with lower creditworthiness.
• Creditworthiness: Banks usually require that the monthly mortgage instalment should not exceed 30-35% of monthly net income.- Interest rate: The interest rate depends on the market situation and individual negotiations with the bank.For foreigners it may be slightly higher than for Spanish citizens.

5. Process for obtaining a mortgage:.

• 1. Application: Submission of financial documents and proof of identity to the bank.
• Property valuation: The bank commissions a property valuation, which may incur additional costs.3. Lending decision: After examination of the documents and valuation, the bank decides whether to grant the loan.
• Signing of loan agreement: If the decision is positive, a meeting is held with a notary to sign the loan agreement and purchase the property.

6. Summary:.

• Foreigners can obtain a mortgage in Spain, but they must meet additional requirements and may face higher costs. The key is to have the right documents, an NIE number and a well-documented creditworthiness. Percentages and costs can vary depending on a number of factors, such as the bank chosen, the type of interest rate, and your personal financial situation.