Getting a mortgage and buying a property in Spain has become increasingly popular. There is a wide selection of property to choose from and the properties are generally more affordable than here in the UK.
If you don’t have the cash to purchase your property, then there are many mortgage options available. You can either extend your current mortgage of take out a 2nd mortgage for your Spanish home.
What kind of mortgage you want may depend on what you want to use the property for e.g. if you want to let your property and will be receiving your rent in Euros, a Euro mortgage might be your best option. It will make offsetting the rent against repayments easier.
Even if you don’t plan to let your property, a Euro mortgage might be easier if your main income is paid in Euros. The same applies if your main income is paid in Sterling. A Sterling mortgage will probably be the mortgage that suits you best.
There are banks and building societies in the U.K. who can offer you an international mortgage. They usually require you be a homeowner in the U.K. and will usually only offer you a 70% mortgage.
Getting a Spanish Mortgage
Spanish mortgages are usually cheaper than ones in the UK. due to lower interest rates. This makes monthly repayments less than you would normally expect. Spanish banks will usually lend up to 70% of the value of the home although you may find you can borrow up to 80% with certain banks.
The banks in Spain base their decision on your ability to repay the mortgage. They will look at your net monthly income. Approximately 40% of you income can be used for mortgage repayments, including current U.K. mortgages and loans. Some banks will ignore any U.K. commitments allowing more of your income to be used for you Spanish property.
Once you have found the mortgage that best suits your needs, you will be asked to produce the following documents:
- Passport
- NIE number – this is your Spanish identification number. You cannot complete a property purchase without this.
- Contract of employment
- Last 3 payslips
- Pre – agreement with the seller
- Your latest tax return
- Details of other mortgages or loans
If you are self employed you will also be required to produce:
- IAE – This is the annual tax paid by businesses. It is only required for businesses making a profit of more than 1 million Euros.
- Record of assets during the last 2 years
- VAT – The tax you have paid for the last quarter and the last year.
Once you have been approved for your mortgage you can pay the deposit and get ready for the closing date stipulated in the pre-agreement.
The Pre-agreement
This is a contract drawn up between the buyer and the seller which will cover both parties until the public deed of purchase is in place. It will state the seller’s intention to transfer the property to the buyer and the amount of deposit agreed. If the buyer chooses to back out of the purchase, he will lose the deposit. If the seller backs out of the purchase he will have to pay back double the amount of the deposit.
Once the bank has a copy of the pre-agreement they will hire an appraiser to ensure that the loan is safe. The bank will only give a loan equal to a determined percentage of the appraised value of the house. Once this is completed, you will be ready to close the sale of the property.
The entire process can take up to 6 weeks to complete. If you intend to get a Spanish mortgage make sure you understand all the conditions of the mortgage. An independent translator can help you if you are not fluent in the Spanish language.