Home loans are made based on the appraisal price or the purchase price (banks
lend the lesser of the two). The era of 100% mortgages is behind us and banks are
unlikely to lend more than 70% of the estimated value of a principal residence,
although a higher percentage can be negotiated by young residents in Spain and
presenting a low-risk financial profile. For second homes, older buyers and non-
residents, the maximum percentage loaned is 60 to 70%. For rural or high-value
properties, mortgages generally do not exceed 50% of the estimate.
Loans are usually made based on your income, with the maximum monthly
payment being 35% of your net income. If you already have a loan on another
property, the two payments are generally taken into account.
Most home loans in Spain are offered at a variable rate, sometimes with an initial
period at a preferential and fixed-rate (1-3 years), then interest rates are annexed to
the Euribor, plus an additional percentage.
Duration of loans
Loans of up to 35 years can be offered to younger residents, but non-residents and
older buyers generally have a maximum of 30, with an age limit of 75.
Management & cancellation fees
The management fees linked to the mortgage are generally higher in Spain than in
other countries. As a general rule, banks charge 1 to 1.5% of the total loan amount
for contracting a mortgage, up to 1% for partial or total cancellations and 0.5% for
Banks require an estimate of your property from a company they have designated
and at the buyer’s expense. You should expect to pay between $ 250 and $ 1,000 or
more for large or high-value properties.
Closing costs & taxes
If you buy using a mortgage, you must declare it before the notary when signing
the public deed and a separate mortgage in his presence. The notary’s fees are set
by the government and vary according to the complexity of the act. Buyers are
liable for stamp duty on both resale properties and new properties, at a rate of 1.5%
of the principal amount. You will also have to register the mortgage in the
cadastre. Normally this is done by a manager appointed by the bank and usually
costs between $250 and $400.
When entering into a mortgage loan, banks often insist that you take out home
insurance (real estate & furniture), which is usually part of their product range. Under the law, however, you are not required to purchase home insurance. If you
decide to purchase insurance, you do not have to designate the lender as the
beneficiary. The insured amount corresponds to the estimate of the property, but it
is calculated according to the amount necessary to rebuild the property, without
taking into account the value of the land. Banks also often insist that you take out
life insurance or a protection policy in case you can’t work. Again, you don’t have to, but agreeing to take one or two can help you negotiate better loan terms. The
fees are based on your age and the loan amount.
Documents required for your mortgage application
You will normally need to provide the following documents to your bank:
- Copy of your passport
- Copy of your NID
- Recent credit report (eg Experian)
- Your account statements for the past six months
- A “simple note” of the property you wish to buy
If you work, you will also need to provide:
- A copy of your last annual tax notice
- Your last three payslips
If you are a self-employed person, you must also provide:
- A copy of your last tax return
There are also many guidelines are available online. Among them HMO Mortgages Ultimate Guide is very helpful. You can find more about HMO mortgage on the internet.