Overview of the Spanish Mortgage Market

The Spanish Mortgage Market is different from the mortgage markets of other countries. It offers a variety of mortgages which are hard to compare, this also makes it difficult to arrive at a decision.

In Spain, any resident can easily buy a property. A non-resident also can buy a property, provided they have an NIE number. An NIE number is the ‘Numero de Identidad de Extranjeros’, the identification number for foreigners. There are several agents in the Spanish Mortgage Market who would be happy to arrange a mortgage for you.

Spanish Mortgage Market- lots of variety

• Self Certification mortgages

A person declares his income as the basis for obtaining a mortgage which is a self declaration of net income after tax payment. The maximum limit of loan available is 40% because of the risk involved and the fee is slightly higher at 2% compared to the normal 1 to 1.5%

• Mortgage on rural properties

For such properties the loan availability is only 50% loan to value and the fees is 16% instead of the normal 7% IVA. A loan of 60% can be obtained, but the set up fee will be higher at 2% instead of the normal 1% to 1.5%. In some cases the land will not be registered initially. If such land is purchased then no loan can be availed for the next two years. Some lands in the rural area are registered for livestock breeding, temporary shelters, farm land workers and for warehouses. The status of registration should be ascertained from local people prior to making a decision to buy.

• Mortgage of 60% loan to value

This is a special kind of mortgage in the Spanish Mortgage Market. The property comes up for sale in the initial stages of construction itself. To complete the project a down payment of 20-30% is required. Upon completion, the value of the property is bound to increase. So the mortgage can be raised to a higher amount.

• Mortgage of 70% loan to value

Spanish Mortgage Market offers this kind of mortgage for residents who are not from Spain. The mortgage amount that can be raised is normally around 79%. The documentation includes a credit report and a report for identification and income.

• Mortgage of 80% loan to value

Spanish Mortgage Market makes available this kind of mortgage for both residents and non-residents with the upper age limit being 75 years of age. Some lenders are willing to extend a 30 year term loan with a 10 year interest only facility for this type of loan.

• Purchase price mortgages (100% in value)

If the mortgage is extended to the entire purchase price, then it is called a 100% in value mortgage. Normally, such a situation does not arise in the Spanish Mortgage Market. Anyone would be asked to provide a margin of their share in case of a mortgage loan. However, a permanent employee in Spain, below the age of 35 years would be eligible to get such a mortgage loan.

The Documentation for Spanish Mortgage Market loans

• Self employed

• Tax returns

• Balance sheet

• Profit and loss statements (Normally certified by the Accountant)

• Bank statement for the period requested for.

• Passport

• Employed

• Form P60

• Tax return

• Latest pay slips for three months

• Bank statements for three months

• Work contract or employer reference

• Passport

Interest rates and repayments

The interest rate is based on the European Central Bank’s base rate and reviewed annually. A 3.75% is considered very good and absolutely affordable in the Spanish Mortgage Market. The repayments are monthly with both the capital and the interest paid together. Annual, half yearly or quarterly instalments are also possible.

Charges

The charges are only 10% of the total value if bought without mortgage. With mortgage it would be 13% in the Spanish Mortgage Market.  Added to these are legal fees of 1%, 1% stamp duty and 7% IVA. The mortgage charges would invite Notary fees, valuation fees, stamp duty of 1% and a set-up fee of 1%to 1.5%. A fixed rate and a variable rate mortgages are also available.