What are the requirements to request a mortgage in Spain?
When applying for a mortgage to buy a home, these are the points to take into account, the bank’s conditions for granting it and the updated documentation that will have to be submitted
The first thing to think about when applying for a mortgage is what is my financial solvency? It is a reflection that should be done for the benefit of the family economy itself, but also because it will be the first point to be valued by the bank to grant the mortgage loan. The ‘golden rule’ is that, at most, 30% of the monthly income is dedicated to the payment of the mortgage, a percentage that can be 35% if other existing loans are added to the payment of the mortgage debt, such as and as recommended by the Bank of Spain.
In addition to not spending more than recommended, it must be borne in mind that most banks grant 80% of the appraised value of the house or the value of the house as a maximum, so it is essential to have 20% saved remaining.
Likewise, there are another series of additional expenses related to the appraisal of the home, taxes, the loan opening commission, copies of the deeds and the simple note that together is equivalent to between 10% and 12% of the price of the House.
How does the bank assess financial solvency?
In addition, the financial institution takes into account another series of requirements to grant a mortgage:
- Monthly income. The minimum can vary from bank to bank, but is usually about three times the future monthly mortgage payment.
- Job stability. Normally it is required that you have a permanent and indefinite job, with some seniority, as a guarantee that the salary will be enough to pay the mortgage payments without problems. To prove it, it will be enough to present your working life. In the case of the self-employed, entities usually require that they have been registered for at least two years and have a demonstrable income.
- Credit history. This is one of the aspects that the bank will review before granting the loan. The better the customer profile, the easier it will be for the entity to approve the operation. The entity will also assess whether the person has previously had a loan or credit that has been fully amortized and within the agreed terms, that there have been no delays in payments, etc.
- Personal situation. The situation of the person applying for the mortgage is also usually taken into account, that is, if she is single or married, if she has children and / or dependents, etc.
- Other assets. The bank also values the possession of other property assets, such as other homes or financial investments.
What are the most frequent doubts when requesting a mortgage?
- How many years can I ask for the mortgage loan? The best thing to do is to find a balance between paying in the shortest possible time (term) and going easy on each monthly payment (installment). If you have a high and stable income you can opt for a 10-15 year mortgage; On the other hand, if the income is lower, it is advisable to opt for one at 20-25 years, and even at 30 years.
- What type of mortgage to choose? With the Euribor at historic lows, it is a good time to opt for a variable rate mortgage. The rating agency Moody’s predicts that the Euribor will not begin to rise until 2023 and that it will remain below 0% until 2030. Although the advantage of a fixed rate interest is that the same is paid throughout the life of the loan. The decision will depend on the personal preferences of each person and the context in which the mortgage is signed. Therefore, is it also key to be advised by experts?
- If I choose a variable rate mortgage, can I later change it to a fixed rate or vice versa? The signature of a type of mortgage does not have to be firm throughout the life of the loan. It can be changed through subrogation or novation, two existing formulas in the banking market.
- Can I apply for a mortgage if I already have other loans? The existence of other large loans does not prevent the bank from granting a mortgage. However, it will ultimately depend on the level of income so that the sum of all debts does not exceed the Bank of Spain’s debt recommendation.
- Do I have to have a bank account open to get a mortgage? It is recommended, but it is not necessary to have an account linked to the mortgage (if this obligation is not specified in the contract). You can pay the fees by directing the receipts into an account of another entity or by transfer.
- Is it necessary to provide an endorsement? In the event that the financial profile is not optimal enough to grant the mortgage, providing other assets or a guarantee can be of great help. However, it is a decision that must be considered in depth, both by the owner and the guarantor, since in case of not being able to meet the quota, the assets can be seized from both parties.