Mortgage in Spain are one of the most requested banking products. Low interest rates that are effective in the country in recentyears, as well as legislative amendments aimed at the maximum protection of the borrower, contribute a high demand for mortgage loans.
Lending for foreign citizens (both residents and non-residents) are somewhat different from lending for Spaniards themselves. Unlike citizens of the country, foreigners are not required to involve guarantors, or issue other property as collateral in order toaccess mortgage. This is a big plus. But there’s also a downside: the tightening of legislation and redirection of avector of protection towards the borrower led to the fact that some banks are very reluctant to work with foreigners. The mortgage loan approval procedure has become more complex, furtherformalities in the form of exhaustive verification of parties to a transaction – a Creditor bank and a Borrower were added.
As a result, the time frame has expanded: now, from 2 to 3 months can elapse from the moment of an application to the bank for obtaining a mortgage loanand until signing a notarized mortgage agreement. However, if the mortgage transaction is properly supported by professionals with a nuanced sense, the chances of receiving a mortgage in Spain are very high.
In this article we will examine the mortgage in Spain in 2020 thoroughly: take a closer look at loan conditions, required documents, types, rates, as well as provide the opportunity to use the function «mortgage calculator».
Which commercial bank to choose for getting a mortgage in Spain
If you expressed your resolve to buy a property in Spain, get ready for the fact that you will have to call, and then visit several banks in person searching of the most favorable conditions. Purchase of property through thereal estate agency will save you a lot of time and trouble, because agency’s employees will assume all negotiations with banks.
Currently, the most loyal banks to foreign borrowers are Banco Sabadell and Banco Santander, as well as Caja Mar and Bankinter.
Despite the fact that all mortgage applications are processed in the head offices,much depends on the Director of a particular branch. That is, negotiations can be conducted not only with various banks, but also with different departments within the same bank (for example, if generally you like the terms and interest rates).
If you are buying a bank property, room for maneuver will be reduced: negotiations will have to be conducted with the bank on whose balance sheet this property is located. Spanish commercial banks make mortgage loans for a term of 5 to 25 years. The system of issuing is based on the loan amount and the age of the borrower. Residents of the country can count on financing up to 80% of the value of the property (taxes and expenses are not included), maximum financing for non-residents is up to 70%.
Mortgage in Spain in 2020 and effective interest rates
Mortgage loans in Spain can be issued with a fixed, floating or a mixed interest rate. The fixed interest rate implies that it will remain unchanged during the entire period of mortgage repayments regardless of economic conditions and market fluctuations. Banks often leave no choice for non-resident borrowers, offering onlythis option.
The floating interest rate is attached to specific financial rates (it is most often EURIBOR in Spain) and reviewed once a year.
The mixed interest rate implies that the maturity of the mortgage loan will be divided into two periods: the fixed rate (for example, for the first 10 years) will be applied for the first period, and the floating rate – in the second one.
Sabadell Bank: mortgage conditions in August 2020
Currently, the bank offers a mortgage at a fixed interest rate.
Length of credit: up to 30 years.
Loan terms and conditions:
2.75% (TAE 3.40%) for a simple loan up to 150,000 €. The following expenses are taken into account by TAE calculating:
- Opening a bank account: commission for opening – 1-2%, but not less 750 €; account maintenance fee − 30 euros per quarter;
- Commission for opening a credit line: 1-2%, but no more than 750 €;
- Independent assessment of the property’s market value: about 300 €.
- Verification of registration data: about 25 € − 1.75% (TAE 2.85%) for a soft loan up to 150,000 € (provided that salary is transferred to the bank and three insurance policies are purchased).
The following expenses are taken into account byTAE calculating:
- Opening a bank account: service fee is 30 euros per monthquarter;
- Commission for opening a credit line: 0 €;
- Independent assessment of the property’s market value: about 300 €;
- Life insurance for the borrower: about 90 euros per quarter for the full term of the mortgage;
- Insurance against non-payment on the loan: about 2,000 € for the firstfive years for the entire amount of capital;
- Home insurance: about 30 € per month for the full term of themortgage.
- Verification of registration data: about 25 €.
*TAE may be changed depending on the amount of the mortgage loan and its terms.
How to get a mortgage in Spain
If the preliminary negotiations with the bank were successful, a prospective borrower receives a certificate of a temporary nature, wherethe mortgage terms are fixed: amount, term, rate, commissions, etc. The certificate is usually valid for 1 month, and during this period the client must fully prepare and submit a set of documents to the bank.
Mortgage registration in Spain requires mandatory opening a bank account. The bank will write off monthly quotas for repayment mortgages as well as additional payments: service fees, bills, insurance policies, etc. from this account.
Also, mortgage in Spain is available only after an assessment the market value of housing by an accredited independent company. The assessment takes into account the age of the housing, its conditions and degrees of wear and tear, type, area, district, etc. The estimated market value may differ from the purchase price. Often the market value of a property is higher than anticipated, and this entails additional costs: for example, the cost of housing insurance will be calculated based on the estimated amount.
The package of documents, including the act of market value assessment, is sent to the bank head office for consideration. The decision is usually made within 1-2 months. In case of a positive decision, the borrower makes a deposit with the bank monetary amount – Provisión de fondos. This is a special reserve from which all taxes and expenses related to registration of a mortgage loan will be paid.
All possible expenses are calculating in advance, and a little more goes to the reserve,in other words, the deposit is opened on the safe side. After the transaction is completed and registration of a notarized bill of sale and a notarized mortgage agreement in the property register, the buyer will be refunded the unused amountof the deposit.
The mortgage agreement is signed in the presence of a notary with the participation of a bank representative. Before signing, both parties are interviewed with by a notary and an additional visit to the notary’s office is organized for this purpose. The borrower fills out an application form and confirms in writing their full andcomplete understanding of the terms of the mortgage agreement and concurred with them.
Documents to get mortgage in Spain
Mortgage in Spain for non-residents
The required documents when applying for a non-resident mortgage loan would be the following:
- Photoshop of the NIE or passport/ID-card.
- Certificate confirming the status of no-resident in Spain.
- Employment contract.
- Last payslips obtained in a country of residence.
- Bank statement for the last year showing income generation.
- Tax return.
- Certificate of tax residence.
- Contract of the property to be bought.
- Any other documents confirming additional income:certificates of investment funds, lease agreements, references from pension funds, bank certificates of available deposits, etc.
All foreign documents must be translated into Spanish.Some banks allow simple translation of documents, but it is better to beprepared for the fact that you will need to make a sworn translation in Spanishby a sworn translator (traductor jurado).
Processing costs for mortgage in Spain
New mortgage law in Spain that came into force in June 2019,shifted a large share of the cost of obtaining mortgage loan from borrowers to banks. In response, banks raised fees foropening of credit lines and established as a mandatory conditionobtaining financing for the purchase of insurance policies. At the same time, banksare forbidden to force the client to buy insurance policies from them.The borrower’s life and real estate must be insured anyway, but now the choice of the insurer rests with the client. Todo not lose a client, banks either offer favorable insurance conditions, or, like Banco Santander, bonuses for each purchased product that reducemortgage rate.
Banks are required to pay for the services of the manager involved in the preparation and registration of the mortgage agreement, notary fee, state fee forregistration of a mortgage agreement in the property register, stamp tax(tax on documented legal actions – IAJD). Also bankspay for their copy of the mortgage agreement received from a notary.
The borrower pays for the services of the company conducting the market value assessmentfor housing, and his copy of the mortgage agreement. And, of course, everythingcommissions, insurance and other expenses related to opening an account andmortgage loan, as well as translation of documents into Spanish.
Mortgage in Spain – changing the lender Bank
The borrower has the right to move to another bank at any time if he is notsatisfied with the conditions, if the branch location is inconvenient, he doesn’t like the service, or for any other reason.
Of course, first it will required to find a bank willing to re-credit the borrower. It may need to collect a set of documents again and translate it into Spanish. But if the conditions in the new bank are more profitable, these costs are worth going to. The first lender bank does not has the right to prohibit or prevent the client from transition.
If the bank is changed during the first three years of the mortgage, the borrower must will pay the first creditor bank 0.15% of the remaining debt amount at the time of leaving. Starting from the fourth year, the commission for moving to another bank and, accordingly, early repayment of the mortgage at the expense of re-crediting, will be 0%.
Early mortgage repayment and mortgage arrearsin Spain
The new mortgage law has fixed the same commission rates for all banks imposed by early repayment of mortgage loans. By mortgage with the floating interest rate, the commission for early repayment will be 0.25% in the first three years or 0.15% in the first five years (the bank and the borrower must agree on three or five years of «quarantine» in advance, even before signing the mortgage agreement), and 0% in subsequent years.
Fixed-rate mortgages for the first ten years can be repaid ahead of time with 2%-commission on the amount of debt, and, starting from the eleventh year, with the payment of 1.5%-commission. As for the debt and the ability to initiate the embargo process, the Spanish banks are also limited by a rigid framework. To initiate the foreclosure procedure, it is necessary that the borrower violated the loan terms as follows:
- If it is about the first half of the mortgage term, the debt shall be 12 quotas or 3% of the total loan amount;
- If it is about the second half of the mortgage term, the debt shall be 15 quotas or 7% of the total loan amount.
We remind you that the company Alegría provides its customers with one hundred percent approval of mortgage loans in respect of banks by the preliminary analysis of documents by our experts.
