How Can I Get a Mortgage?

With the introduction of the euro, mortgages in Spain became quite easy to get, however with the recent credit crunch many banks are now tightening their policies and their minimum standards for the consideration of an application.

How do Spanish Mortgages compare to rates from other European countries?

Rates and terms are amongst the best in Europe at the moment, the ease of obtaining a mortgage and low rates currently offered by the bank have led the Spanish to release equity from their own property and invest in the country’s housing boom.

How should you go about researching the finance for your property?

Before you come over to see any property we can put you in contact with local banks to get a quote on how much you can borrow, what the repayment costs would be, and what price range and how big a deposit you would require. Armed with this information, you can go out and find the right property, with the peace of mind of knowing your exact price range and that the funds, costs, etc, have all been pre-calculated.

If you are getting a mortgage it is standard to pay a smaller deposit of around 1000€ which will be refundable if you are unable to raise the finances. Once the mortgage has been approved you would then be expected to pay the balance of the normal 10% deposit.

Spanish mortgages

A typical Spanish mortgage requires you to show proof of income, there are an increasing array of mortgage products available on the market and you will be advised on which one best suits your circumstances. Spanish mortgages can be arranged to buy a new or resale property, for renovation of an existing property or for the construction of a new property.

Mortgage amounts are set by the valuation of the property by an approved tasador (valuer). Tasadors are qualified technical architects with special training in property valuations. A valuation will cost approximately 350€, and will lead to a full report on the property, the bank will then set the amount to be lent according to this figure.

The banks in Spain typically lend up to 70-80% to non-residents and 80-90% to residents. In certain circumstance it is possible to have a sales price that is considerably lower than the valuation given by the tasador, and it may be possible to get a higher than normal loan.

Euro mortgages are available on a variable interest rate repayment, fixed interest rate repayment, interest-only or endowment basis and can be for anything from five to thirty years, however, all mortgages should be fully repaid by the age of 75. Therefore your age will affect the length of term you can qualify for.

Spanish lenders assess the applicant’s ability to repay the loan and not potential future rental income. As a guideline, 35 per cent of your net income can be spent on a Spanish euro mortgage, however surveys in 2005 showed that Spanish banks are currently lending on average up to 50% of net income.

What do you need to set up your mortgage?

Here is a list of the information and documentation you will have to provide depending on your personal circumstances (for each person wanting to appear on the mortgage):

1. Full Name and address
2. Marital status
3. Passport(s), NIE number(s) or residence permit(s) (residencia)
4. Last three wage slips and last P60
5. Last six months bank statements
6. Other rental and / or investment income
7. Any proof of other sources of income that you want to borrow against
8. Details of any pension(s) you are receiving
9. Details of any savings
10. If self-employed, the last two years tax returns and a letter from your accountant confirming your income and tax payments for previous year
11. Details of where you work and how long you have worked there

 

The bank will also need a copy of the Nota Simple and Escritura for the house that you want the mortgage on along with a copy of the private sales contract or deposit receipt to confirm the agreed sales price

The application process takes two to four weeks from the moment the bank receives all of the relevant paperowrk. However, an agreement in principal may only take 24 hours, subject to you providing all of the supporting documentation.

Mortgage interest rates

Most mortgages interest rates are usually indexed to the Euribor (Euribor is determined by the European Banking Federation (EBF) each day) and the banks currently charge an extra 0.5% to 1%. A variable rate mortgage therefore tracks the Euribor index. A fixed rate mortgage will mean repaying at a higher rate than the current variable rate, with an interest that is fixed for the period of the mortgage.

Costs of setting up a mortgage

The costs of setting up your mortgage will vary, generally, the more complex the scenario the higher the fee. As a guide the fees involved will typically be between 1- 2% of the amount borrowed.