Buying a property in Spain, and wondering how to get a mortgage? This article is for all foreigners. Whether you are a Spanish resident (expatriate) or a non-resident foreign buyer, this is for you.
If you want to get help for this, contact MortgageDirect, leading independent broker for Spain and Portugal.
Mortgage in Spain or in your home-country?
Two options are available to you:
- mortgage in your home country
- mortgage with a Spanish bank
What is the best option? It depends on your personal situation.
Mortgage in your home country
Remortgaging a property you own already (primary residence for example) to buy overseas is a good technique. It may provide better interest rates than a regular mortgage. Also, if you have paid off your existing mortgage you can borrow a large amount. Let’s see the specifics of this technique.
Requirements
Banks do not like to lend money to buy abroad. However, if you already own assets in your home country, they will lend you money based on the net value of these assets (capital already reimbursed).
Typically, if you already paid back €100,000 of capital to the bank for your primary residence, you can get €100,000 mortgage to buy abroad.
Advantage
If you get a mortgage in your home country, the bank can finance 100% of all costs related to the operation. They won’t ask for any justification of what you will do with the money. Also, the bank can apply very competitive interest rates, similar to what they would offer if you were buying real estate domestically.
If mortgage interest rates are better in the country where you live than in the country where you plan to buy, then consider getting a mortgage in the country where you live
Mortgage in Spain
Getting a mortgage in Spain is your only option if you don’t already own assets in your home country. Disadvantage is that you will not get a very good loan-to-value (LTV), which means you’ll have to tap into your savings. But if your savings are good, this option is good too.
Loan-To-Value (LTV)
Spanish residents can generally borrow up to 80% of the property’s assessed value whereas non-residents are limited to 60–70% LTV. However if you buy a bank-owned property, it may be possible to borrow up to 100% of the property’s assessed value.
Specificities
If you’re financing your acquisition with a Spanish bank, there are a few things you should know.
Mortgage, Transaction Costs, and Tapping into Your Savings
As mentioned before, the LTV might be 70%. So that means you need to use savings to pay for 30% of the property value, as well as all costs associated with the purchase (8% to 15% of the property value in general: ITP, notary fees, lawyer, valuation fees).
If you buy a Spanish property worth €100,000, you will finance the acquisition with a mortgage for €70,000 (70% LTV), so you will have to bring savings of €30,000 for the property value itself, but also €11,567 in taxes and transactions costs.
Buying a €100K property? You may need to bring €41K in savings, as the Spanish bank will only finance 70% LTV
Fixed and Variable Rate Loans: Which Is Better?
Fixed or variable rate loans? At the moment, banks are offering mortgages at a fixed rate for an average of 2.50%, on a 25 years period. Variable interest rates are lower, however it’s much risker on the long term, as rates may very well go up.
If you’re an English-speaker, these banks will be able to help you
To get a mortgage in Spain, to buy a property, you can contact the banks below, among other possibilities of course:
- Banco Santander
- Caixabank
- Sabadell
- Bankinter
- BBVA
If you’re a French-speaker, these French-speaking banks will be able to help you
The advantage of the banks below is that they have offices in France too, and bankers who often are French themselves.
- Targobank (affiliate of Credit Mutuel)
- CIC Iberbanco (affiliate of CIC)
- BBVA