Financing

After the financial crisis Spanish Banks are more conservative in loaning money but it is still definitely possible.

Their policy nowadays for non-residents in Spain is to loan up to 70% of the valuation or purchase price, taking the lowest one of these as their reference. In some cases it is possible to obtain an 80%.

Residents in Spain can obtain up to 80% or more for purchasing property in Marbella.

Banks consider that 33% of your yearly income should be equivalent to the total repayment of a said year for mortgage repayments. The 33% should be calculated after you have deducted any other loans or mortgage repayments you might have.

Marbella WOHNEN Immobilien can help you obtain a mortgage to purchase your Marbella property.

 

 

How do I get a mortgage?

With a good income situation you can get a mortgage relatively easily. Up to 70% of the value of the object is still possible today without any problems. In some cases you can also get higher loan amounts, but due to the general economic situation, this is not so easy anymore. Getting a mortgage in Spain is not too difficult, but as with France and some other European countries, non-status (self-certification) mortgages are not available and lending terms are a little more restrictive than in the UK.

To get a mortgage in Spain you will have to provide proof of your identity, as well as your income and any existing liabilities you have, such as mortgages and loans. Finalizing your mortgage may also require some additional information about the property being purchased, and will require you to pay for a survey, conducted by the lender’s valuer, or tasador. This should cost €300 – €500 – roughly the same as a Homebuyer’s Report in the UK. Here are two basic lists covering the minimum financial information that employed and self-employed people will need to provide. Pensioners fall into roughly the same category as employed people – it will just be necessary toprovide proof of your pension income and financial liabilities.

Employed/Pensioners

When applying for a Spanish mortgage, employed people will be required to provide:

Your NIE (Numero de Identificacion de Extranjeros) – a foreigner’s ID number

A reference from your employer

Your last 3 pay slips

Your last P60

Your last 6 months’ personal bank statements

Pensioners can qualify by providing proof of their ongoing pension income,

but borrowers over 60 are normally only eligible for shorter term mortgages – perhaps 10-15 years.

Self-Employed

Self-employed Spanish mortgage applicants will need to produce:

Your NIE (foreigner’s ID number)

3 years audited accounts

Last 12 months’ business bank statements

Last 6 months’ personal bank statements

How Much Can I Borrow?

Different than in your home country you can borrow up to a maximum of 70% of the purchase price or valuation. If you are a fiscal resident, you may borrow up to a maximum of 80%.

Spanish banks will take into consideration your income and also your existing mortgage charges. The guideline is that around 1/3 of your net income may be used for mortgage payments. You will need to prove to the bank your income and liabilities by showing them original documents. Spanish banks require complete insight into your financial situation.

Rental Income

Mortgage lenders in Spain will not take potential rental income into consideration when processing your mortgage application – you must be able to afford a property without receiving the rental income.

 

The cost of a mortgage in Spain

 

Mortgage valuation

Property valuations, or ‘tasaciones’ in Spanish, play an important role in the Spanish property market as they determine how much banks are prepared to lend to house buyers.

Before granting a mortgage a Spanish lender will require that the property be valued by one of their appointed valuation companies. This can cost anything from a few hundred Euros to over a thousand Euros depending upon the value of the property. The person applying for the Spanish mortgage has to pay this cost.

The value of the house, which the estimator determines, applies in principle as basis for the calculation of the maximum mortgage sum. On the other hand, some banks take the lower value as an underlying: either the purchase price or the estimated value. But these are exceptions and should not be considered here.

Arrangement or opening fee

Credit institutions charge a percentage for granting the mortgage. It is a single payment that must be made before the loan agreement is signed.

Home and life insurance

It is compulsory to take out a home insurance policy for the property that is going to be mortgaged, at least against fire. The policy beneficiary must be the bank, so as to guarantee that, in the event of a catastrophe and total loss of the home, the bank will receive the full amount that had been given. Occasionally, the bank may demand that a life insurance policy be taken out and linked to the loan, so that in the event of the owners’ death, the debt will be settled.

Notary and Registrar’s fees

Mortgage loans are constituted by means of a public deed that is signed before a notary. That deed must also be registered at the corresponding Property Register.

Stamp Duty

This is a tax that is applied to acts that are formally laid down in public documents, which must be registered and which entail a financial sum, such as mortgages. It is calculated according to the maximum mortgage liability (the sum of the capital, ordinary interest, late-payment interest, administrative expenses and eventual Court proceeding costs).

Administrative agency

The bank will entrust the processing of the mortgage deed to an administrative agency. This procedure basically involves collecting the document from the notary’s office, settling the tax, submitting the document at the Property Register and collecting it again once it has been entered.

 

New Mortgage Law

On 17 June 2019 the new Mortgage Law entered into force in order to adapt, with years of delay, our legislation to the EU directives approved back in 2014. This European regulation sought to harmonize the legislation of the member countries with the objective of providing security for banks but mainly for their clients when accessing to finance.

 

Some of the most important changes

Who pays the expenses? The cost of valuation or appraisal of the property correspond to the borrower, but unlike what happened until the entry into force of the new law, now ALL management fees, stamp duty (AJD), notary fees and Land Registry fees for the constitution and registration of the mortgage correspond to the lender entity.

Services that the bank can charge. The bank will only be authorized to charge for those services or expenses related to the loan/mortgage that have been specifically requested, or expressly accepted, by the borrower and only when these services have been effectively provided or the expenses have existed and can be shown. In relation to the opening fee or commission, it may be charged only once and must include all the costs of studying, processing and granting of the loan.

Commissions that the bank can charge. The new law only allows to charge the following commissions:

  • In loans with variable interest, 0.25% of the total or partial capital advanced repayment during the first three years of the loan contract, or alternatively, 0.15% but in this case over the first five years of validity of the contract.
  • In fixed interest loans, compensation of up to 2% of the total or partial capital advanced repayment during the first ten years of the contract may be requested, and after that period will fall to 1.5% until the end of the loan life.
  • The change of a variable to fixed interest during the term of the loan may only accrue a commission in favor of the bank of 0.15% during the first three years of the contract.

How long does the process take?

It is very different from bank to bank how long it really takes from the day the application for the loan up to the promise or payment of the mortgage.

From experience we can say that you already have to bring some patience.

A realistic order of magnitude is if you assume around 4 weeks. Sure, we have experienced it a few times, that only a few days have passed from the application to the payment, but that too are rather exceptions.

It should also be noted that loan commitments are only valid for a certain period of time.

The day of registration

On the day of Escritura (notarised deed of sale), the representative of the bank also comes to the notary and lets you sign the notarial mortgage contract. He then usually has one or more confirmed bank checks for the seller. Again, there is the issue of the mortgage and the payment train by train.

If the seller previously had a mortgage on the property, his bank representative also appears at the notary’s appointment and deletes the seller mortgage. This happens almost at the same time at the notary.

 

Mortgage arrangements

A. Interest

When the general interest rate is low, it could be interesting to change to a fixed rate. Nowadays more and more mortgages are being taken out with a fixed interest rate. There are different ways to fix the interest. When choosing the right bank make sure you do not get tempted only by a low interest rate, these are offered through unnecessary and expensive cross selling products.

B. Runtime

Note the maximum duration of the mortgage. Each bank has a fixed maximum age of the customer up to which it lends mortgages. In most cases, this age is 75 years.

For example, if you are 50 years old, you will be granted the mortgage for a maximum of 25 years. The mortgage term is important for calculating the monthly burden. The longer the term, the lower the monthly burden. And the amount of the monthly burden is again important for determining the total burden of the customer.

C. Early repayment

You gain extensive freedom by being able to repay the loan at any time for a small fee. The “prepayment penalty” is usually only between 0.5 to 1%.

This makes the mortgage relatively flexible, because you can replace it whenever you want or can.

Mortgage Simulator

Do you want to calculate the installment of your mortgage or your personal loan? Enter the amount, term and interest rate and you will get the installment to pay for your loan.

 

GOLDEN VISA

Possibility of application for a residence permit in Spain by citizens not residing in the EU

From the 27 of September 2013, citizens not residing in the EU also have the possibility of applying for a residence permit in Spain, with which they can move freely through the 27 countries of the Schengen area. For this, they must invest, at least, 500,000 euros of own capital in a property in Spain. Amounts over 500,000 euros can be financed with a mortgage.

 

The residence permit is also valid for the spouse and minor children, as well as for the parents of the investor. Being required to pay taxes as non-residents; the minimum length of stay is not limited. Costa Blanca Realty International also offers you, together with our lawyers, competent and professional advice on this matter.

GOLDEN VISA HIGHLIGHTS

  • Investment of €500.000
  • Full family residency
  • Flexible. No requirement to reside.
  • Permanent Residency from 5 years
  • Citizenship from 10 years
  • EU Schengen visa travel