With the introduction of the euro, mortgages in Spain became quite easy to get, however with the recent credit crunch many banks are now tightening their policies and their minimum standards for the consideration of an application.
Mortgages
How Can I Get a Mortgage?
How should you go about researching the finance for your property?
There aren’t really brokers in Spain for mortgages so before you start viewing properties it might be beneficial to talk to a couple of local banks to get an indication of how much you can borrow, what the repayment costs would be, what price range to view, if you would be accepted and how big a deposit you would require. In Spain the mortgage is based on the property, not the person so you won’t know actual figures until you have found a property you like.
As in the UK when you apply for a mortgage the bank will want you to show proof of income, there is an increasing array of mortgage products available on the market and you will be advised on which one best suits your circumstances. Spanish mortgages can be arranged to buy a new or resale property, for renovation of an existing property or for the construction of a new property.
As previously mentioned, mortgage amounts are set by the valuation of the property which is done by an approved tasador (valuer). Tasadors are qualified technical architects with special training in property valuations. A valuation will cost approximately 400€, and will lead to a full report on the property, the bank will then set the amount to be lent according to this figure.
The banks in Spain typically lend up to 70% of the value of the property to non-residents and 80% to residents. Mortgages are available on a variable interest rate repayment, fixed interest rate repayment, interest-only or endowment basis and can be for anything from five to thirty years; however, all mortgages should be fully repaid by the age of 75, therefore your age will affect the length of term you can qualify for.
Spanish lenders assess the applicant’s ability to repay the loan and will not take into consideration future rental income.
What should I look for when buying?
- Location, location, location, that’s what they always say when buying a property and yes it is important, especially if you’re thinking of buying a house that’s opposite an empty plot of land. You never know what might be built there, it could be anything from another house to a 24 hour discotheque.
- If you’re buying on an established urbanisation there’s not much to worry about as the town hall plans are already well established, as is the infrastructure and most houses have probably changed hands a couple of times so you’re more or less guaranteed a smooth purchase.
- If you’re not buying in an urbanisation it’s another thing altogether as very different rules and regulations exist.
- Lots of houses in the countryside have been built illegally so you have to be careful and really need to make sure that the “plan parcial” has been checked at the local Town Hall and you see all the licences.
- As a rule of thumb a property can be built on 10,000m2 in the campo but even that isn’t set in stone because some areas are zoned as farming land and you can’t build there at all.
- Red boards on the outside of a property show that they are illegal builds and the Town Hall could demand that the property be pulled down, best case scenario in situations like these, there is a hefty fine to pay!
- Other important things to know are: does the area flood? Which can be the issue wherever you buy. Are there residents in the street? Someone to keep an eye on your property if you’re not there all the time. Is the property on a community? What are the community rules?
- Some people buy off plan and this is another matter altogether as it entails a good deal of imagination, especially in the early stages of a new project. You will be shown plans of the layout of the properties and individual houses and in some cases they might even have a show house for you to look around. If the builder has already put the infrastructure in place, streets, street lights, pavements etc., even the odd house, this is a good indication that all is well.
What do you need to set up your mortgage?
Providing a mortgage
Here is a list of the information and documentation you will have to provide depending on your personal circumstances (for each person wanting to appear on the mortgage):
ONCE THE MORTGAGE HAS BEEN AGREED, the bank will also need a copy of the Nota Simple and Escritura for the house that you want the mortgage on, along with a copy of the private sales contract or deposit receipt to confirm the agreed sales price.
The application process takes two to four weeks from the moment the bank receives all of the relevant paperwork. However, an agreement in principal may only take 24 hours, subject to you providing all of the supporting documentation.
Mortgage interest rates
- Mortgage interest rates are indexed to the Euribor (Euribor is determined by the European Banking Federation (EBF) each day) and the banks currently charge an extra 0.5% to 2.5%. A variable rate mortgage therefore tracks the Euribor index. A fixed rate mortgage will mean repaying at a higher rate than the current variable rate, with an interest that is fixed for the period of the mortgage.
Costs of setting up a mortgage
- The costs of setting up your mortgage will vary, generally, the more complex the scenario the higher the fee. As a guide the fees involved will typically be between 1- 2% of the amount borrowed plus administration costs.
What should I look for when buying?
Location, location, location, that’s what they always say when buying a property and yes it is important, especially if you’re thinking of buying a house that’s opposite an empty plot of land. You never know what might be built there, it could be anything from another house to a 24 hour discotheque.
If you’re buying on an established urbanisation there’s not much to worry about as the town hall plans are already well established, as is the infrastructure and most houses have probably changed hands a couple of times so you’re more or less guaranteed a smooth purchase.
If you’re not buying in an urbanisation it’s another thing altogether as very different rules and regulations exist.
Lots of houses in the countryside have been built illegally so you have to be careful and really need to make sure that the “plan parcial” has been checked at the local Town Hall and you see all the licences.
As a rule of thumb a property can be built on 10,000m2 in the campo but even that isn’t set in stone because some areas are zoned as farming land and you can’t build there at all.
Red boards on the outside of a property show that they are illegal builds and the Town Hall could demand that the property be pulled down, best case scenario in situations like these, there is a hefty fine to pay!
Other important things to know are: does the area flood? Which can be the issue wherever you buy. Are there residents in the street? Someone to keep an eye on your property if you’re not there all the time. Is the property on a community? What are the community rules?
Some people buy off plan and this is another matter altogether as it entails a good deal of imagination, especially in the early stages of a new project. You will be shown plans of the layout of the properties and individual houses and in some cases they might even have a show house for you to look around. If the builder has already put the infrastructure in place, streets, street lights, pavements etc., even the odd house, this is a good indication that all is well.