Mortgages and Financing in Spain

Clarify financing as early as possible

If you need a mortgage for your property purchase, we recommend not leaving the topic of financing until after you've found your dream property. An early review helps you understand:

• What budget is realistic
• How much of your own capital you need
• What monthly instalment is affordable for you
• Which banks are generally an option
• What documents are required
• What additional financing costs may arise

An initial financing review can also help you act more quickly and confidently during a later purchase negotiation.

Can non-residents get a mortgage in Spain?

Yes. Spanish banks also finance property purchases by people whose tax or habitual residence is outside Spain. However, non-residents often need to finance a larger share of the purchase price from their own funds than buyers resident in Spain. The available financing always depends on the bank and the individual situation. As a rough guide, international non-residents are often offered financing of up to around 60–70% of the property value recognised by the bank. However, this is not a guarantee. Income, age, existing loans, the source of the income, property type and creditworthiness can significantly influence the decision.

What if I'm resident in Spain?

For buyers resident in Spain, banks can sometimes offer higher loan-to-value ratios than for non-residents. However, here too there is no automatic entitlement to a specific level of financing. Statements such as "residents get 100% financing" should therefore be treated with caution. Such financing arrangements are rather the exception and depend heavily on the property, the bank and the personal situation. In your financial planning, you should generally assume that you'll need your own capital both for part of the purchase price and for the purchase-related costs.

Purchase-related costs are usually not fully financed

A common mistake in budget planning is only taking the equity share for the property price into account. In addition to the purchase price, costs in Spain include, among others:

• Property transfer tax, or IVA and AJD for new builds
• Notary and land registry costs
• Legal fees
• Financing costs, if applicable
• Other individual purchase costs

These costs generally have to be paid mostly from your own funds. If your total available budget is, for example, €300,000, this doesn't automatically mean you can buy a property for €300,000.

How does a bank decide how much I can borrow?

The bank doesn't just look at the value of the property. Your personal financial situation is at least equally important. Factors that can be taken into account include, for example:

• Regular income
• Employment status
• Self-employment
• Existing loans and obligations
• Monthly living costs
• Age
• Term of the desired financing
• Equity capital
• Credit history
• Tax returns
• Source of income

For international buyers, exchange rate risks can also play a role, for example if income is earned in British pounds rather than euros.

What documents do I need?

The exact requirements vary from bank to bank. However, the following documents can typically be requested:

• Passport or identity document
• NIE
• Proof of residence
• Employment contract or proof of self-employment
• Recent payslips
• Tax returns
• Bank statements
• Proof of existing savings
• Information on existing loans
• Annual accounts or company documents, if applicable

Self-employed buyers often need to provide more extensive proof of income than employees. Your financing specialist can tell you early on which documents are needed for your situation.

How is the property valued?

For a mortgage, the bank usually has the property valued by an authorised surveyor — a so-called tasador. This valuation is important for the bank because it forms, among other things, the basis for calculating the possible financing amount. What matters, therefore, is not necessarily only the agreed purchase price. If the bank values the property lower than the purchase price, this can mean you need additional equity capital.

Fixed, variable or mixed mortgage?

Three main types of mortgage are offered in Spain.

Don't just look at the interest rate

When comparing different mortgages, you shouldn't rely solely on the advertised interest rate. Banks can have different terms and requirements. Relevant factors can include, for example:

• APR (effective interest rate)
• Term
• Monthly instalment
• Options for extra repayments
• Costs of early repayment
• Required insurance
• Account management
• Salary account requirement
• Other bank products linked to the interest rate

The lowest nominal interest rate is therefore not necessarily the cheapest overall offer. Have the different offers compared on as comparable a basis as possible.

What happens to a variable mortgage if interest rates rise?

This should definitely be considered before signing a contract. The Banco de España points out that banks must provide a simulation for variable mortgages showing how different interest rate developments could affect the monthly instalment. However, this simulation is not a forecast of future interest rates. Regardless of this, we also recommend considering different scenarios yourself. Ask yourself, for example: Could I still comfortably pay my monthly instalment if it rose noticeably?

This helps you avoid planning your financing solely on the basis of the instalment currently on offer.