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Mortgages in Spain

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Lending terms 

Nowadays foreign citizens that apply for a mortgage to buy a property in Spain can expect to receive 50%-60% of the value of the property from the spanish banks that depends on the creditworthiness of a buyer. 

How many years can you expect? In general the most mortgage terms in Spain run up to 25 years.

Mortgage payments should not exceed 35% of a borrower’s net annual income.

The types of mortgage in Spain: 

  • variable rate mortgages: mortgage payments vary according to the base rate set by the European Central Bank (EURIBOR).
  • fixed rate mortgages: mortgage payments remain unchanged during all the mortgage term. These mortgages normally have higher interest payments in the short term but don’t run a risk of the increasing of payments in the future like the variable rate mortgages.
  • mixed rate mortgages: mortgage payments remain unchanged during the first 5-10 years and vary afterwards.

The average interest rate for the residential property is 3-4%, for commercial property – 4-5%.

Documents 

The final list of the documents that are required for a mortgage application in Spain will depend on a bank but the general documents are the following: 

  • passport.
  • NIE (foreigner identification number).
  • private contract with a seller of a property.
  • for employed: contract of employment, last 3 payslips and income tax return of the last 2 years.
  • for self-employed: local tax on economic activities, VAT tax paid for the last quarter and the last year.
  • for the business owners: constitutional documents, corporate income tax statement for the last 2 years and dividends distribution.
  • proof of the annual property tax (IBI) paid.
  • information about other mortgages or loans that a buyer may have.
  • buyer’s credit history.
  • all property deeds that a buyer may have.
  • information about the current assets (mutual fund statements, bank statements for the last 6 months from tha country of a permanent residence and etc.).
  • proof of non-residency.

All the documents should be in English or translated into Spanish by a local official translator assigned by the Spanish Ministry of Foreign Affairs. 

It takes approximately 1-2 months for banks to process a mortgage application. 

Costs 

Obtaining a mortgage to buy a property in Spain will incur the following costs:  

  • property valuation fee: before giving a mortgage a spanish bank will require a property to be valued by one of their own appointed appraisers.
  • mortgage opening fee: 1%-2% of the mortgage amount.
  • mortgage insurance: it is a legal requirement to obtain general house and contents insurance. Additionally some banks can require a borrower to contract a life insurance.
  • stamp duty (AJD – actos jurídicos documentados) – 1.8% of the mortgage amount.
  • mortgage early cancellation fee: its percentage varies between the banks.
  • mortgage notary and register fee: approximately 0.5%-1% of the mortgage amount.

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