Mortgages in Spain for American buyers


American buyers are active in Spain

A rising number of Americans and North Americans are buying in Spain and applying for a Mortgage win Spain.

Exactly why this is not clear but seems to have some link to the drop in prices particularly in the well sought after areas and the major Cities along with the Spanish being in general very welcoming to all visitors whatever their nationality.

Why take a Spanish loan

Due to currency exchange fluctuations and low interest rates across Europe many buyers form the American continent look to take a mortgage in Spain.

Spanish loans are readily available for non resident buyers, unlike some countries like the UK where it is very difficult for a non resident to gain a mortgage , in Spain the Spanish Banks actively promote Mortgages in Spain. Most Spanish Banks will have small but significant non resident teams within their head offices who can risk assess and underwrite a mortgage application from an applicant who lives outside Spain.

Loan to values for non residents do not exceed 70%.

What can US applicants achieve on a Spanish Mortgage

For many nationalities outside the EU lending is restricted beyond what might be granted to a non resident who resides and pays taxes in Europe. Many lenders will only consider for the mortgage in Spain a 50% loan to value and others 60% loan to value. Some nationalities due to the heavy money laundering rules and lack of transparency in paperwork for the country of origin may find it difficult to get a loan at all.

Americans and Canadians on the other hand with the right lender selected can expect to gain up to the full 70% offered to EU citizens. This is because the quality of the paperwork and the robustness of the system in the US for reporting of incomes and recoding of debts is high and in line with what can be sourced by EU applicants.

The documents are in English easily understood and interpreted and reflect very closely countries like the UK.

The lower level of due diligence required by the Spanish Banks to ensure they know and are clear where the source of deposits come from is another plus in favor of the Americans. Often the process of getting a loan can be dictated by not whether an applicant meets debt to income criteria but whether the lender can justify clearly to their regulator the know your client rules and money laundering regulations.

Terms and conditions

On top of the possibility of gaining a loan up to 70% loan to value Americans residing outside Europe will also be able, with the right lender to avoid contracting life cover with the Bank, which can be a costly and unnecessary extra burden each month.

Those residing in Europe will find they will need to take life cover but for at least one bank their insurance arm is not able to provide cover for non EU citizens so this compulsory product can be avoided.

Process of application

What American applicants will need to be aware of is that the process is not as slick and streamlined as it is in the US.  An AIP granted based on little more than a signed self declaration and a credit score are not available in Spain so fully documented applications are the only way to gain an Approval In Principle.

Product types

Product types are very basic in Spain and are made up of variable trackers and fixed rates fixed for the full term. There are no offset loans nor interest only and not the sophisticated range of solutions one might find elsewhere in the world.

There are however a number of legal aspect relating to a mortgage in Spain that all applicants should make sure they are aware of before committing themselves.

These will include an inability to raise a loan once the property has been purchased., no re-mortgage market so you cannot move a loan at a later date and changes to the mortgage deed into which the legal obligations are written, meaning that even some minor changes required at a later date, could incur some high taxation and administration costs.

Contract services of an expert

As is the case for most people applying for lending in a country they are not resident in you can save yourself time, heartache and money by reaching out to an expert  rather than trying to approach the lenders direct in the belief you will get better service and pricing if you do.

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