Financing your property purchase in Spain

Equity release

If you already own a property and have equity in it, it may be possible to raise money by mortgaging this property. This is an inexpensive way to raise financing because if the property is located outside of Spain then you can avoid the costs of setting up a Spanish mortgage.

Mortgage

Mortgage Calculator

Disclaimer: The calculations performed and results provided by this calculator are approximations only.

If you don't want to do equity release, it is possible to secure a mortgage for the property you are buying in Spain by obtaining a mortgage from a local Spanish bank. We have great contacts with good, local banks and we can help you obtain a mortgage. Many of our clients use the local branch of La Caixa. Others have used Solbank. Both banks have multilingual staff and are used to working with non-residents. La Caixa is often able to give very quick, preliminary approval on the operation without requiring a valuation and they can even do this via email. In this case, the final approval is subject to the results of the valuation. Many of our clients send the information required directly to the bank via email and they actually don´t meet the bank until they come to complete the purchase and everything has been arranged and approved in advance via email.

You will find banking in Spain quite pleasant. It is very personal and you can directly email and phone the staff of the local offices. There are no automated voice recordings with the banks here. You deal with people and not machines!

Generally mortgages from Spanish banks for non-residents have terms of up to 30 years. However, the actual term depends on your age (or the average age of all of the people taking the mortgage) because most banks want the mortgage to be repaid before the borrower reaches 65. Exceptions can be made to this age limit, but it all depends on your personal situation.

After the financial crisis of 2008, banks are more conservative, but they are still lending. If your income level warrants it and you can prove that you can comfortably make the repayments (of capital plus interest), then it is possible to obtain a mortgage. The banks want to ensure that the mortgage payments don´t represent more than 30 to 35% of your net, disposable income. The interesting thing is that the banks only take into consideration the current interest rates, which are at historical lows. They don´t factor in future increases. It is generally possible to receive an interest only period of up to two years that you can use at some point during the term of the mortgage.

Most Spanish mortgages are based on a variable, not a fixed, interest rate. The mortgages are generally based on the Euribor index, which tends to be better than the IRPH that some savings banks try to offer. Even if the differential/margin that the bank offers on the Euribor index is higher than what they offer on the IRPH index, normally the Euribor option is the better one. You can look at the historical levels of both indices to decide for yourself.

The value of the mortgage granted to a non-resident for a second home is normally up to a maximum of 60% of the lower of the declared price or the valuation. If you are a non-resident, but the property you are mortgaging will be your main residence or will soon become your main residence, then it may be possible to borrow up to 70% of the lower of the declared price or the valuation. If you are a resident of Spain and the property will be your main residence, you can borrow up to 80%. The maximum amount a bank will lend is one of the first questions you should ask them. Some banks say they will lend a high percentage, but then the valuations they give on the property are low and so the actual percentage that they are lending is the same as the other banks with lower percentages but realistic valuations.

For non-residents, the banks are concerned with income levels more than on total outgoings and property held outside of Spain. Spanish lenders don't tend to take into consideration any potential future rental income that can be earned on the property you intend to purchase.

You will need to provide the banks the following information.

  1. copy of your passport
  2. your Spanish NIE number (This isn´t necessary for the initial application.)
  3. your income tax returns for the last 2 years
  4. your last 3 salary slips
  5. your bank statements for the last 6 months for ALL of your bank accounts including retirement accounts, pension funds, investment accounts and fixed term deposits
  6. if you own other property in Spain, an updated ¨nota simple¨/title for each property

For Danish, Swedish and Norwegians, there is a Danish bank called Nykredit Bank that will lend money at very favourable conditions for the purchase of property in Spain. They will lend up to 80% of the lower of valuation or the purchase price. The interest rate is very low and can be fixed-rate, floating-rate or floating-rate with a cap for 10 years. The maturities or term can be for up to 30 years and it is possible to have an interest only period of up to 10 years. They are also very efficient and fast in approving the mortgage. Unfortunately this mortgage can only be granted to Danish, Swedish or Norwegian nationals. For more details, contact Siw Mosegaard Madsen, the account manager in the bank´s Marbella office at smm@nykredit.dk or on +34 952 90 51 50.