Spanish mortgage for non-residents

Spain has always been a popular choice for those looking to study, work, retire or vacation abroad – its striking coastlines, rich culture, fantastic architecture and delectable culinary creations are just some of the attractions that appeal to the rest of the world.

Of course choosing a stylish rental is not the only option; buying a property in Barcelona makes more sense for those wishing to stay on a longer basis or enjoy their own holiday retreat.

And when it comes to the purchasing of property, an understanding of a few crucial concepts and costs is rather vital to ensure you end up with the home that fits both your pocket and lifestyle.

Rates and terms

The good news is that Spain encourages foreign investment in property, which means that non-residents can definitely acquire their own little piece of Spanish paradise.

The amount of the Spanish mortgage is decided after the relevant lenders have reviewed your personal and financial profile. In general, Spanish mortgage lenders provide 50%-70% of the value of the property to foreign buyers. However, it is worth mentioning that some buyers have worked with lenders offering them up to 80%.

In general, mortgages on second homes are considered more risky (and are therefore offered at higher rates) than main residential houses. The reason for this is because of the assumption that customers in financial trouble are more likely to default payment on a holiday property than their main home.

Should you seek to buy a property in Barcelona you are likely to need a 30-40% deposit to secure a mortgage. Bear in mind that, you will also need to pay fees and taxes, which can amount to a further 12-15%.

Spanish mortgage terms depend upon your age. Most Spanish banks will expect the mortgage to be repaid by age 70 but it is possible to obtain it up to age 80. Usually Spanish mortgage is granted for 20 to 25 years.

Different institutions use different criteria to assess potential buyers’ creditworthiness. An affordability ratio based on your net income after tax is created, and your debt repayments are also inspected to ensure that they do not exceed 30-35% of your net earnings.

Should you wish to buy a property in Barcelona, you can also expect to complete a personal balance sheet to show your existing financial arrangements, as well as provide documents to prove your income and expenses.

The appropriate fees

In general, five different costs are usually associated with the process of obtaining a Spanish mortgage:

  • The biggest is the Spanish mortgage deed duty, which is 1.8% of the overall loan.
  • Bank fees usually make up around 1% to 1.5% of the loan.
  • Notary fees, which are a maximum of 0.5% of the loan value. Should a Spanish property have a mortgage secured against it, this has to be declared before a Notary. These fees are based on the number of clauses in the deeds and a mortgage deed will have approximately the same number of clauses as a purchase deed.
  • A valuation fee, which isnormally 0.10% of the value of the property (before granting a mortgage, a Spanish lender will require the property to be valued by one of their own appointed appraisers).
  • Any appropriate fee agreed to be paid to a mortgage broker. Many lenders charge a fixed fee of around 1% for setting up the mortgage.

What you need

There are a number of documents that are typically required by a bank from a potential buyer, which are:

  • The DNI/NIE number (anybody looking to purchase a property in Spain needs to obtain a NIE number).
  • A contract of employment.
  • The buyer’s last 3 payslips.
  • The buyer’s latest income tax return.
  • The buyer’s pre-agreement with the seller.
  • Proof that the property tax (IBI) on the house is paid up.
  • Details of other mortgages or loans that the buyer may have.
  • All property deeds, both in Spain and overseas.
  • Records of the buyer’s current assets (bank/mutual fund statements, etc.).
  • Prenuptial agreements, if any.
  • A certificate of non-residency, which is a form available from the bank (if the buyer is a non-resident).
  • Local tax on economic activities (IAE), if the buyer is self-employed.
  • Records of any assets acquired during the last two years, if the buyer is self-employed.
  • VAT tax paid for the last quarter and last year,if the buyer is self-employed.

Banking and broker services

Any person who wishes to buy a property in Barcelona can arrange a mortgage in Spain directly with their chosen bank, or make use of a broker. All potential buyers need to be wary of fraudsters who claim to be brokers, though, especially ones who ask for upfront fees.

Working with a broker is particularly useful, as many Spanish banks do not offer set mortgage terms, but rather work on a negotiated basis with each individual client. This means that having someone on your side who speaks Spanish and has an in-depth understanding of the system can really help the entire process proceed smoothly.