Financing Your Property Purchase
If you don't have the cash available, there are two ways to pay for a home abroad:
- Extend the mortgage on your property in your home country
- Take out a new mortgage secured against your home abroad from a bank in Spain
Banks in Spain will generally offer up to 70% of their valuation of a property if you meet their proof of income requirements. Some developers have arrangements with a bank whereby they can offer higher mortgages, sometimes up to 100% of the selling price but this is quite rare. Some banks have an absolute limit of 60% mortgages.
All mortgages from Spanish banks are made in euros and the monthly repayments must be paid in euros.
If your income is in another currency it is important to consider your exposure to possible future changes in rates of exchange.
The bank will normally ask for the following information:
- proof of identity
- proof of current address
- detailed credit report from Experian or equivalent
- last 3 months of bank statements showing regular income and payment of all regular financial commitments
- last 3 payslips
- latest P60
- letter from employer confirming annual salary, length of employment and type of contract
In the case of self-employed, the last 3 items will be replaced with the last 3 years SA302 (self-assessment tax calculation), last 3 years company audited accounts and certified statement of net wealth.
Once you have found the property that you want to buy, the bank will need the Land Registry report and will arrange an independent valuation of the property before determining the amount to be lent.
Costs of arranging a mortgage
You should budget additional costs of 2% of the amount to be borrowed. The cost of arranging the mortgage varies according to the provider but is usually around 1-1.5% of the amount borrowed. In addition, a mortgage will increase the Notary and Land Registry fees.
Transfer of an existing mortgage
When a Spanish property is sold and the seller has a mortgage secured against it, the mortgage can be either cancelled or taken over by the new owner (known as subrogation). The subrogation fee is usually paid by the new owner and is typically lower than an arrangement fee for a new mortgage (often 0.5% instead of 1%). If you are offered this option, it is important to bear in mind that subrogating a Spanish mortgage means continuing with the existing mortgage on the same terms and conditions. In doing so you might not be receiving the best terms available in the current Spanish mortgage market. On the other hand the set up costs plus Notary and Land Registry fees will be less.