Application process for contracting a Spanish Mortgage

The process of applying for and contracting a mortgage in Spain may differ from what you’re used to in your country of residence. While lending practices are governed by EU regulation, the legalities are also shaped by Spanish law.

Spanish banks rarely offer fixed, off-the-shelf products — instead, they tailor their offer to each individual application. A full, well-packaged application allows us to negotiate the best possible terms and conditions on your behalf, while keeping underwriting time to a minimum.

We always aim to ensure your application contains everything the bank needs to make a decision on first presentation. In the long run, it’s far more beneficial to provide more information upfront rather than less, avoiding constant back-and-forth between us and the bank’s risk department.

Applying for a Spanish loan

Spain follows a different legal process to other countries when it comes to applying for a mortgage. While there are many similarities, the legal requirements reflect Spanish law, and as a non-resident buyer, you may not be familiar with them. It’s therefore best to work with an experienced broker like us before making an application for a mortgage in Spain.

• June 2019 saw EU-wide practices adopted across the board.
• These rules ensured all EU-based banks adhered to a specific set of guidelines.
• Most notably, this covers the information provided both before and at the signing of a home loan.
• That said, differences still remain between countries in terms of product conditions and securitisation.

At IMS, we offer a no-cost, no-obligation full financial approval service. To find out more, email or call us today.

Gaining a financial approval

To secure a financial approval, a formal application must be made — agreements in principle without documents, or with only limited documentation, aren’t possible in Spain.

• Applications for Spanish mortgages broadly follow the same process as most other countries.

Spanish banks require documentary evidence from the applicant, covering:

• Firstly, confirmation of identity.
• Secondly, their financial situation in terms of income and debts.
• Thirdly, the source of deposit funds.
• Only official documents are acceptable.

We ensure your application is professionally packaged to enable a swift decision and secure the best possible terms and conditions.

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Spanish Bank application requirements

Each bank in Spain sets its own mortgage application requirements, agreed in line with Bank of Spain oversight.

• The lender must carry out due diligence.
• Verifying loan affordability is a key requirement.
• Lenders check that regular debt payments don’t exceed their specified ratio.
• This calculation includes the new mortgage payment in Spain.
• Affordability ratios used in risk assessment vary from bank to bank.

As a general rule, debt payments shouldn’t exceed 35% of net income — Spanish banks assess affordability based on net, not gross, income.

How do Spanish Banks underwrite an application

Each bank in Spain follows a different internal process for underwriting a mortgage application.

• A few Spanish lenders use internal scoring systems.
• Information fed into these systems provides an initial viability check.
• The scoring system takes into account the performance of existing loans.
• This includes historic indicators of high or low risk, based on the performance of the bank’s existing mortgage book in Spain.
• An application can be affected if it falls into one of the system’s high-risk categories.
• Many banks in Spain, however, don’t use sophisticated underwriting tools.
• Instead, they work to a set range of parameters around debt-to-income ratios.
• Maximum loan-to-values are another key factor.
• The individual preferences or judgement of the underwriting team can also play a role.

We understand how each bank in Spain operates, including how they calculate affordability. We’ll listen carefully to your objectives, take the time to fully understand your financial situation, and place you with the lender best suited to your requirements and circumstances.

What is the stage after financial approval

A financial approval doesn’t require a valuation. It’s only after approval — once terms and conditions are agreed and a specific property is identified — that the applicant arranges and pays for a valuation.

• Each bank in Spain has its own panel of valuation companies.
• Current legislation allows you to instruct a valuation company of your own choosing, as long as it’s registered with the Bank of Spain.
• That said, some banks may not accept the application if you choose to use your own valuation report.
• The Bank of Spain regulates valuation companies.
• When producing a mortgage valuation, the valuer is obliged to follow a specific set of criteria.
• The valuation report checks the legal standing of the property, including:
• That the necessary licences are in place.
• That there are no outstanding infractions registered against the property.

These checks, however, are there to protect the bank, not the buyer. As such, a valuation should never replace the due diligence a Spanish lawyer would carry out on your behalf — though it does provide an additional layer of security.

 Obtaining a Spanish Mortgage Offer

In the past, banks in Spain only confirmed offers verbally. Without written confirmation, the terms actually signed at the notary could end up differing from what borrowers had originally expected.

• All Spanish banks are now required to provide a much higher level of transparency, under legislation introduced on 16 June 2019.
• Spanish banks are required, at offer stage, to provide borrowers with a FEIN and a general information sheet.
• This document clearly sets out the agreed terms of the loan, which should then be reflected in the deed at completion.
• The FEIN is a personalised information sheet outlining the basis of the loan offer. At signing, the Notary is now required to check the deed against the FEIN provided.
• The FEIN must also show the TAE — the annual percentage rate, which factors in all costs associated with the loan.

At least one day before completion, the borrower (or their POA) must attend the Notary in person. During this visit, the loan signatory is asked a number of questions to confirm they understand the terms of the loan contract.

Completion of a Spanish Mortgage

All Spanish mortgages have their terms embedded in a legal deed.

• The deed sets out the terms and obligations for both the lender and the mortgagee.
• Once signed, it’s legally binding on both parties.
• The Notary oversees the transaction.
• Either the mortgagee or their representative, along with a representative from the bank, must be present.
• The Notary requires the person signing to either speak Spanish or bring an interpreter.
• Understanding exactly what you’re signing is essential.
• Bank arrangement fees are payable at completion, deducted from the gross loan amount.

Changes to the deed after completion may require a new deed, though there are a few exceptions — a change of rate or loan term can be made without one. Once signed, the mortgage deed is legally binding on both parties.

deeds and invoices become available once registration has taken place, with original documents relating to the transaction forwarded to the mortgage holder.

Post Signing of Mortgage Deed

Taxes and costs are retained at completion, which may include tax obligations on behalf of the seller — deducted from the funds transferred to them.

• The paperwork is passed to the Land Registry by the bank.
• Copies of the deed are given to the client.
• It’s worth bearing in mind that the original deed won’t be available until the Land Registry has approved it.
• Occasionally, the Land Registry may request clarification on certain matters before registration can proceed.
• To ensure the loan is properly secured, the lender retains control of the registration process. Loan deed costs are covered by the Spanish bank, while purchase deed costs are paid by the buyer.
• Once the Land Registry approves the transaction, the deed is finalised.
• Until that point, the exact cost of registration remains unknown.
• Most banks therefore retain a slightly higher level of funds than strictly required.

Any surplus is refunded to the borrower once all invoices have been settled.

Post mortgage registration in Spain

Your appointed lawyer should ensure all paperwork is obtained after registration and held securely.

These documents are essential when you come to sell your Spanish property.

• Firstly, they’re needed to ensure costs can be offset against capital gains tax.
• Secondly, at the point of sale, all documents must be handed over to the new buyer’s lawyer.

After registration, changes can still be made to an existing Spanish mortgage deed.

• These are known as novations, and are limited to interest rate adjustments and changes to the loan term.

Under current legislation, it’s now possible to switch from a variable rate to a fixed rate product.

• Legislation caps the cost of switching from variable to fixed at 0.15% for the first 3 years, and 0% thereafter — though in this case, notary and land registry costs may fall to the borrower.

Switching to a fixed rate after completion is only possible if the bank in question offers a fixed rate product.