Applying for a mortgage in Spain, much like applying for a mortgage in the UK or any other EU country, is a lengthy process. It is important for the lender to ensure that they are acting responsibly and that you will be able to afford your mortgage repayments. For this reason, part of the mortgage application process will involve completing a mortgage Affordability Assessment. At the same stage, another thing your lender will need to know is exactly how much the property you wish to purchase is worth. For this reason, buyers are advised to secure a valuation of their property at as early a stage as possible. The property appraisal can be key to having a mortgage approved. With that in mind, here’s everything you need to know about property valuations for the Spanish mortgage market, and how the process might impact you.
The Importance of Securing a Mortgage Valuation in Spain
In short, you cannot secure a mortgage in Spain without a mortgage property valuation, because this valuation will form the basis of the amount the bank will approve a loan for. The value of the property the loan will be secured against forms apart of most banks risk criteria. The banks will also look at whether there are any outstanding legal issues with the property, such as whether any ‘advertencias’ (warnings) or ‘condicionantes’, (more serious conditions) are attached to the property. If there are then you want to know this sooner rather than later, because these will affect whether the bank can lend you the funds you need or not.
How Much Can I Borrow?
The amount you can borrow for your mortgage in Spain will be determined by whether you have Spanish residency status or not. Most Spanish banks will lend a maximum of 70% of the property value for non-residents, and up to 90% for residents.
Why is The Valuation Figure So Important?
We know why it is so important to secure a valuation for any property you want to buy, but why is the figure so important? What will the impact be if the valuation of the property is higher or lower than you expected? Banks in Spain will look at two figures when determining how much they are prepared to lend you: the price of the property (as advertised by the seller) and the valuation. The lower of these two figures will be most significant, and the valuation will be used to determine how much you can borrow for your mortgage. Therefore, if the valuation of the property is lower than the price you have agreed to pay for it, you may not be able to secure finance for the amount you need.
Valuations can vary wildly across Spain, and the valuation can sometimes be very different from the market value you have agreed to pay. As this can affect your ability to secure the mortgage you need, you are advised to secure a valuation at the earliest possible stage, to prevent any heartbreak further down the line.
Can I Choose Who Values My Property?
Most banks will have their own property valuation providers, but you don’t have to use their vendors if you don’t want to. Some banks would certainly prefer that you did though. The 2019 Spanish Mortgage Law gives borrowers the right to choose any approved company to carry out the valuation for them. The only caveat to this is that the company must be approved by the Bank of Spain.
When looking for the right company to carry out your property valuation you are advised to choose a reputable accredited company with local representatives with knowledge of the market in your area. This will help you to ensure you are receiving the most accurate valuation possible. Your mortgage broker or estate agent can help with this. Whilst valuations are important for working out whether a property is worth what you want to pay for it, the system isn’t perfect. In Spain, for example, significant emphasis is placed on the registered square metres of a property without often considering other factors. This means that if the property you want to buy is small but has excellent features (a swimming pool or jacuzzi bath, for example) you may receive a poor valuation. Choosing a competent vendor to carry out your valuation is the best way to avoid this.
Are you thinking of moving to Spain? Perhaps you want to invest in the perfect holiday bolt hole for long, lazy Spanish summers? Then why not get in touch with our local property experts, who are perfectly placed to help you find the home of your dreams.