Can i get a mortgage in Spain?
If you are purchasing property on the Costa del Sol or Marbella, it is likely you’ll want to get a mortgage in Spain. Here are some key points to consider if you are going to get a Spanish mortgage, known as a hipoteca. The process of procuring a mortgage in Spain is really quite simple, and your solicitor will be able to guide you through the process when any doubts arise.
How to get a mortgage in Spain:
Get a NIE
The very first thing you’ll need to do is get a NIE number. This is the Número de Identidad para Extranjeros, a fiscal identification number issued by the Spanish government for foreign residents or those with financial or other ties to the country. The application process is quite straightforward and your solicitor will help you to fill out the NIE application form and gather the requisite supporting paperwork and documentation. The process can take over a month, so give yourself sometime before you dive into the mortgage selection process.
Open a bank account
You can either open a bank account with the bank you plan to use for your mortgage or an account with any bank with offices in Spain that is accredited by the Bank of Spain. It’s very easy to open an account in Spain, and you can even do it online at most banks. Having a bank account will ensure you have a financial institution to send funds to, from which you can make mortgage payments and cover other housing-related expenses.
Financing your new Spanish home: how much will my Spanish mortgage cover?
If you require financing in order to purchase your home, you’ll need a mortgage. Fortunately, Spanish banks offer financing to foreign non-residents who purchase property in Spain. In fact, they even offer mortgage products specifically designed for foreign buyers. The financial conditions associated with these mortgages are similar to those offered to Spanish citizens: generally, the maximum loan value is 60-70% of amount the home has been appraised for, and this also applies to purchase of land (for building purposes). The issuing financial institution usually offers a maximum of 30 years to pay back the loan, and the amount of the loan offered will be influenced by factors such as your equity, solvency, outstanding debts and other relevant financial history.
Know that there are specific mortgage products for retirees that will allow you to name a guarantor that is a family member, which can be helpful when it comes to reducing inheritance tax issues if that appointee is also part owner of the property you are purchasing. Your solicitor can advise you on this point.
Interested in interest: how much will the mortgage cost?
You will certainly want to shop around to find the best deal for a Spanish mortgage as most most Spanish lenders use the Euribor rate, the interest rate most commonly used to calculate mortgage payments, plus a percent margin. The Euribor is used for both variable and fixed interest rate mortgages in Spain, although most Spanish mortgages are variable. In order to compare rates, it’s a good idea to look at the TAE (Tasa Anual Equivalente or Tasa Anual Equivalente Variable), as this is yearly rate includes the Euribor, additional bank interest, institutional commissions and costs of required insurance policies. By looking at the fine print and the TAE you can compare mortgages to figure out which offers the best deal, the lower the better.
If you choose a variable mortgage, as mosts people in Spain do, you should run several simulations of interest changes, to ensure that you will still be comfortable with your payments should interest rates rise.
In addition to taking into account interest rates and TAE, you’ll need to have enough cash on hand to cover the costs associated with the purchase of a home. These include:
- ITP or Impuesto de Transmisiones Patrimoniales (Property Transfer Tax) which in the Andalucía region is about 8% for sold for 400,000€ or less, 9% for homes sold for 400,000€ to 700,000€ and 10% for homes sold for 700,000€ or more. In the case of a new home that has never been sold before, you’ll pay a VAT rate of 10% instead.
- Costs related to signing the deeds with a notary and inscription of the property ownership in the Spanish Land Registry
- Solicitor expenses, about 1%
If you get a mortgage you’ll also need to cover expenses associated with the loan such as:
- Home appraisal fee (this is normally between 250-450 Euros).
- Arrangement fee for opening the mortgage account (generally between 0% and 2% of the principal borrowed and determined by the agreement with the bank).
- AJD (the Actos Jurídicos Documentados, or Stamp Duty Tax) which varies according to region, but is generally between 0.5% and 1.5%
- Costs associated with the mortgage signing and title deeds.
Your solicitor will help you wade through these details, but you can expect to pay about 10% down on your home plus 4-5% of the purchase price in closing costs mentioned above.
Normally a mortgage approval in Spain requires you to purchase life and home insurance from the lender as well.
Next steps on the process of getting a mortgage in spain: the deposit, pre-contracts and completion
Once you have initial approval from the lending entity, you will agree to a deposit amount for the purchase of your home. The Bank of Spain (Banco de España) requires certain pre-contractual documents which your solicitor will draw up. These documents simply confirm that you agree to and understand the terms and conditions of the home buy and subsequent mortgage. After review by your solicitor, you’ll sign the mortgage deeds and the purchase title deeds at the notary. More details on the necessary legal agreements such as the reservation contract, contracts exchange and final deeds are available in our property buying guide. When the requisite contracts have been signed, they will be formalised by the Land Registry of Spain and the process is complete!
In Spain, you will be expected to pay taxes (surprise, surprise) as a homeowner. This is true for foreign property owners, even those who only live part-time in their Spanish residence. Spain has an Impuesto sobre la Renta de No Residentes, IRNR, which is tax on non-residents who have income in Spain, unless they are already paying IRPF (Impuesto sobre la Renta de las Personas Físicas, or Personal Income Tax). In Spain, the difference between a resident and a non-resident comes down to how many days a year you live in Spain (over 183 days a year makes you a resident). Your solicitor can help you to establish which tax regime (IRNR or IRPF) you fall under.
Obviously, if you pay personal taxes in your country of origin, your Spanish taxes can be adjusted as Spain has tax agreements with most countries to avoid double taxation.
In addition, every year you will need to pay taxes relating to your property. These are primarily the IBI (Impuesto sobre Bienes Inmobiliarias or Property Tax) and Rubbish Collection Tax (Tasa de Residuos Sólidos Urbanos). The IBI is calculated based on the catastral value of the property. This is a rated value of the home established by the Spanish government, and the IBI is generally between 0.451% and 1.3% in Marbella, depending on the type of property.
Rubbish collection taxes are defined yearly in Marbella, and the rates can be consulted online. Generally this tax has a yearly cost between 23 and 301 Euros depending on the size and location of the residential property. For a summary of taxes associated with property ownership in the Marbella area, please consult our online tax guide.
Knowing how to get a mortgage in Spain is the first step in your journey to securing the home of your dreams in Marbella. The process is quite straightforward. All you need is a basic understanding of the steps we’ve outlined here, a Spanish solicitor to guide you through the process and a little bit of time to secure a Spanish mortgage. The earlier you begin the process, the sooner you’ll have everything in order when you find a home you wish to purchase. If you’re keen to learn more about the process of buying a home on the Costa del Sol, check out our property buying guide in Spain