You’ve seen the house of your dreams in Spain, but it’s a little more than you expected to pay. Or perhaps, you are wanting a holiday home and you can’t quite stretch to paying the asking price all in cash. For many people, taking out a mortgage to buy a Spanish property is an attractive option.
If you’ve done your calculations and know that you can afford the ongoing commitment to monthly payments, how should you go ahead and apply for a mortgage in Spain?
It’s a similar process here to what you would find in most other countries. You need to be able to demonstrate that you have sufficient money to act as an acceptable deposit and that you have the regular income to make the monthly payments.
Residents and non-residents can apply for a mortgage here. However, as you might expect, mortgage providers are a little less enthusiastic to lend over the odds than they perhaps were at one time.
Restrictions on a Spanish mortgage
You will be expected to be able to contribute a large deposit and they will want to see proof of income to ensure that you are in a position to pay your mortgage now and in the future.
A mortgage cannot be taken out for longer than 30 years and must be repaid by retirement age. New mortgages must be accompanied by a handwritten note signed by the client saying that he/ she has been given details about the mortgage and understands the possible risks and content of the contract.
Applying for a mortgage – the initial stages
If you are considering taking out a mortgage you should:
- Decide how much to ask for – you must take into account all the expenses involved in applying for the mortgage as well as how much you can afford monthly from your income for the interest
- Compare quotes from different mortgage providers
- Make sure you are familiar with all the terms and conditions of the mortgage provider you’ve chosen
- Ask for a firm offer that comes with all the details and the complete contract
What you should do next
Your next steps include:
- After you have accepted the firm offer, the mortgage provider will send the documentation to the notary’s in order to prepare the Mortgage Deed
- The notary then needs three days prior to signing the Deed to request the nota simple
- The signing of the Mortgage Deed will take place at the same time as the signing of the Title Deed
- After the signing, the Notary will send an electronic version of the Title Deed and the Mortgage Deed to the Land Registry in Spain
As well as the additional cost of your monthly payments, there will be an administrative cost applied by the mortgage lender. Make sure you are clear about how much this will be as it can amount to around 2% of the mortgage itself.
If you do purchase with a mortgage the Title Deed will be kept with the mortgage details by the mortgage provider. You will, however, receive a copia simple which is a legal copy of the Title Deed. Once the mortgage is paid then you will receive the Title Deed.
Paying off your mortgage
If you do find at some point that you are able to pay off your mortgage then just be aware that you will need to inform the Spanish Land Registry too. If they are not informed it will still be down on your Deed that you owe money against your home.
In order to make sure that the records are in order, a representative from your mortgage holding bank needs to sign the Mortgage Cancellation Deed at the Notary Office. This can then be sent to the Land Registry.
The pros and cons of having a mortgage in Spain
Funding your new property partly with a mortgage can be a good alternative. Some people feel that with a mortgage provider involved there is additional security as the provider will apply its own checks. However, if you use a company such as Ábaco, then that shouldn’t be part of your reasoning. Ábaco will make all the necessary checks for you.
You do need to be aware that evictions because of failure to pay the mortgage have been high profile here. What has caused particular concern is that even if the house is sold for less than the mortgage, the borrower can still be in debt to the mortgage provider for the full amount. There are an increasing number of examples where this ongoing debt has been waved, but it’s not yet universal.
However, this should not put you off. With proper budget planning and an understanding of how much you can expect to pay throughout the purchase process, there is no reason why you should be caught unawares.
This article is based upon the information supplied in our property conveyancing handbook ‘Buying a property in Spain’.