Mortgages in Spain
Spanish mortgages are granted as a percentage of valuation or purchase price whichever is the lowest. Maximum mortgage to values are 70% with most lenders, limited to 60% for non-Spanish residents. Higher loan to values can apply where a property is being bought directly from the Bank and the mortgage is from the same Bank. We here at SGM Abogados can advise on the right mortgage for you.
Terms for mortgages in Spain
Maximum terms range from between 20 to 35 years depending on each individual Bank. Age restrictions do apply which can vary from Bank to Bank and range from between 60 to age 80 years of age.
Types of Mortgages in Spain
Repayment MORTGAGES are the main product in Spain. Interest only has disappeared from the market. This loss of interest only facilities has happened under pressure from the Bank of Spain.
Fixed rate MORTGAGES are available but not offered by all Banks and normally tend to have higher interest payments in the short term, if interest rates rise a fixed-RATE mortgage holder might end up paying less than would be the case with a variable-rate. At the very least they give borrowers the ability to know exactly what their mortgage repayments will be for any given period of time.
Some mortgage lenders also offer a mixed mortgage that involves a certain period (for instance 5 years) of fixed interest payments and a floating rate thereafter.
Costs on a Spanish Mortgage
All Banks charge a fee known as the Bank opening fee or mortgage arrangement fee. This is taken from the mortgage amount at the notary on completion. Fees for Banks range from between 1%and 2% of the mortgage amount.
Other fees associated with a mortgage in Spain include the following :
- Valuation fee
- Notary fees
- Land Registry fees
- Tax known as AJD which in our area is 1,8% of the amount borrowed
- Bank administration fee
Early repayment penalties for a mortgage in Spain
By law early repayment penalties cannot exceed 0.50% in the first 5 years and 0.25% thereafter. This is for partial and full overpayment. If a fixed RATE is taken then the redemption penalty maximum increases to 2.5%.
Bank criteria for approving the mortgage
Liabilities should not exceed 35% of your net monthly income. Banks use the following variables to determine your ability to pay off the mortgage:
Existing liabilities (existing loans or mortgages, monthly maintenance agreements..) Future liabilities including the proposed mortgage
Present income and investments.
Documents necessary for the mortgage application
- Copy of your passport
- Copy of your NIE number
- Employment contract
- Your last three or five salary pay statements or pension income
- The last tax declaration made in your home country (P-60)
- If you are an employer or are self-employed, a copy of your tax returns and annual accounts for the last two fiscal years
- Information about other properties owned fully or partly
- Details of the property you are planning to buy ( purchase contract, IBI, title deed, etc)
- Information about any other sources of income