Questions answered about getting a mortgage in Spain
Sean Woolley from Cloud Nine, with help from experts Kevin Monger and Howard Steel from Mortgage Direct, answers questions how to secure a Spanish mortgage for a place in the sun. What is the loan to value for a non-resident buying in Spain? Seventy per cent is the maximum, but a lot of the banks have now reduced it to 60 per cent if it’s in a currency other than the Euro. If you want to buy in the name of a company, it’s a maximum 50 per cent. It’s important to shop around, especially if you’re not earning in Euros.
What mortgage products are there in Spain? The Spanish mortgage market is relatively unsophisticated, as there are no interest-only or buy-to-let products. Occasionally it’s possible to get a year or two interest only while you are doing a selfbuild. However, that would only last while you are building the property, after that and in all other cases, it has to be on a capital and interest repayment basis.
You can choose from a fixed or variable rate. If you go for a fixed rate, when you go and sign your mortgage deed, your interest rate is fixed from that day onwards. You don’t have to go to the market again in two years, three years or five years as you would do in the UK and renegotiate better terms.
What are the current rates for fixed and variable rate mortgages?
As we all know, interest rates are on the rise. Typical rates are now around
2.1 to 2.5 per cent for a fixed rate mortgage and around Euro Interbank Offered Rate of about one per cent plus 1.2 per cent for a variable rate product.
Experts are recommending choosing a fixed rate mortgage, given that predictions are that interest rates will continue to rise.
However, it does vary, as banks don’t follow the European mortgage directive. This means you can have banks and even individual branches offering different rates and terms, which is why shopping around or using a mortgage broker is a good idea.
A word of caution. Be careful with the additional products that banks are using to disguise the true cost of the lending. Some banks might say you need to have alarm systems, life insurance policies etc. It is really important to actually look into the detail of each offer, including any arrangement fees and exit fees to work out what the true cost of the financing is, so you can
accurately compare.
Am I eligible for a mortgage in Spain?
To be eligible for a mortgage, clients will need to satisfy a number of conditions, primarily the affordability test, i.e. that they have the means to afford the monthly repayments.
Most banks and mortgage brokers will insist on you providing your last three to six months bank statements, payslips and a list of existing liabilities (other mortgages, loans etc), plus a credit report from the likes of Experian.
How long do you need between speaking to a mortgage broker and getting things approved? A broker will do a pre-assessment and the mortgage application process can take anything between three or four days to two to three weeks. The whole process can be signed in six to eight weeks, however clients cannot sign for the purchase of the house until after ten days of receiving the mortgage offer, and then they go to the notary to sign on the property.
Contact a broker as soon as you are thinking about buying property in Spain. They will run through your profile to see if you are going to qualify for a mortgage or not.