Spanish Mortgage Product Types

Understanding Spanish Mortgages

Spanish mortgage products tend to be less sophisticated than those in other countries, and terms differ significantly between non-residents and Spanish nationals. Understanding the loans available — and their limitations — before house-hunting puts you in a strong position to make a safe, informed offer.

Key Features of Spanish Mortgages

• All mortgages offered by Spanish banks are repayment loans
• Maximum loan-to-value is up to 75%, though 70% is more typical
• Standard terms run between 20 and 25 years
• The mortgage must be repaid by age 80 at the latest, though most lenders cap this at 75
• Most lenders require applicants to be no older than 65 when the loan begins
• The law permits overpayments
• Regular monthly overpayments aren’t automatically built in, but you can request permission in advance to pay more in a given month

Early repayment charges for variable rate loans

• For variable-rate loans, the law caps early repayment penalties at 0.25% during the first 3 years, or 0.15% up to year 5, dropping to 0% after that.
• Most banks charge the maximum allowed on both full and partial overpayments.
• Fixed-rate mortgages carry higher early repayment penalties.

Get in touch for a detailed breakdown of how and when early repayment penalties apply to your situation.

Early Repayment Penalties on Fixed and Mixed-Rate Loans

Fixed-rate and mixed fixed/variable-rate loans can carry higher early repayment penalties during the fixed-rate period. Banks calculate these as a percentage of either the interest rate loss or the capital repaid, whichever is lower — up to 2% during the first 10 years, dropping to 1.5% after that.

Contact us today for a personal assessment of the options available to you.

Interest-Only Mortgages in Spain

Interest-only mortgages, once widely available in Spain, have effectively disappeared from the market. Since the banking crisis, Spanish banks have removed this option entirely, and all purchase loans are now issued on a repayment basis. Banks assess affordability on the regular repayment of both capital and interest.

Affordability Ratios

Spanish banks assess affordability based on net, not gross, income, and only count income declared on personal tax returns. Beyond the general 35% net income guideline, banks look closely at the specific outgoings that count against you:

• Rent or existing mortgage payments, plus the new Spanish mortgage payment
• Car loans, personal loans, or other hire purchase
• School fees or child maintenance

Each bank weighs these differently, and some also factor in potential future exchange rate or interest rate changes. We understand how each bank assesses affordability, ensuring your application goes to lenders who can approve it.

What Types of Mortgage Products Are Available in Spain?

Non-resident mortgages in Spain are for a holiday home or main residence — Spanish banks generally only offer residential mortgages to non-residents. If a property is bought as an investment, banks won’t factor in rental income when assessing the application.

There are three types of Spanish mortgage products you can apply for.

Variable Rate Products

Variable rates are available to all non-residents who meet the bank’s criteria. Spanish banks generally track the 12-month Euribor rate, but reassess it either every 6 or 12 months, depending on the lender — giving you a period of rate stability each time.

At application, the bank agrees a margin above the Euribor, which stays fixed for the life of the loan. At each review, the bank applies that month’s Euribor rate, as published by the Bank of Spain at the start of the relevant month.

• Variable rate mortgages in Spain are always traditional trackers
• Spanish banks generally track the 12-month Euribor rate, reviewed every 6 or 12 months depending on the lender
• The agreed margin above Euribor remains fixed for the life of the loan
• By law, early repayment penalties are capped at either 0.25% during the first 3 years, or 0.15% up to year 5 — you can choose between the two options, dropping to 0% after that

Spanish lenders can differ on margin, rates, linked products, and set-up costs. A headline interest rate may require you to take out linked products — the advertised rate is only achievable if you contract these.

Spanish banks are legally required to offer two options if they include linked products: one with linked products, and one without. This lets you weigh up whether the rate discount is genuinely worth it.

Contact us today to find out if a variable rate is right for you.

Fixed Rates

In recent years, Spanish banks have expanded their range of fixed-rate mortgages, encouraged by the Bank of Spain. Fixed rates are normally set for the entire life of the loan, protecting you from any rise in the Euribor over that period.

A fixed rate suits applicants who value payment stability. If you don’t earn in euros, it also removes one of the key variables that can otherwise affect your monthly repayments.

• Most lenders now offer a good range of 10 to 20-year full-term fixes, with rates from 2.5%
• Since remortgaging isn’t standard practice in Spain, a fixed rate gives you stability for the whole loan term
• Early repayment penalties can be higher than on variable rate products

You can’t lock in the final fixed rate at application stage — it’s confirmed at formal offer, in the FEIN (the official Spanish offer document). Most lenders honour the rate given at financial approval, provided completion happens while that approval is still valid — approvals generally last 3 months.

Fixed-rate Spanish mortgages aren’t available to every applicant, and your currency of earnings can affect eligibility.

Want to know more about current fixed rates in Spain? Get in touch and we’ll talk you through the options — contact us today.

Mixed Rate Products

A small number of lenders now provide mixed rate products. These combine a shorter fixed-rate term with a move to a variable margin once the fixed period ends — letting you hedge against short-term rate rises while still benefiting from any future drop in the Euribor.

When the fixed period ends, the loan automatically switches to the variable rate agreed at the outset — there’s no separate application or approval needed at that point. Early repayment penalties also revert to the lower variable-rate structure at this stage, rather than continuing under the fixed-rate terms. It’s worth reviewing your circumstances as the switch approaches, since this is often a natural point to consider overpaying.

• Shorter-term fixes typically run 3 to 5 years
• After the fix, the loan moves to a variable tracker, normally at a lower margin than standard variable products
• Few lenders offer mixed rate mortgages in Spain
• Nationality restrictions may apply

Mixed rate products can suit applicants who want short-term stability but plan to overpay or redeem in the medium term, and who want a lower margin than a standard variable offers.

Because relatively few Spanish lenders offer mixed rate products, careful comparison is essential — including pricing, set-up costs, and any linked products required to access the rate.

Contact us to find out more about which products might suit you and what you could borrow.

Buy-to-Let Mortgages in Spain

Buy-to-let doesn’t exist as a distinct Spanish mortgage product. That said, Spanish banks place no restriction on an owner’s ability to rent out their property.

• Banks never underwrite the loan specifically as a rental-purpose loan
• Future rental income doesn’t count toward the application
• Banks assess the application purely on personal affordability, typically to a ratio of 35% of net income, covering the new Spanish payment alongside any other existing commitments

Commercial Mortgages in Spain

Commercial borrowing is very difficult for a non-resident to secure in Spain. Banks always assess the loan against your personal financial situation — any future income the premises might generate doesn’t count.

• Non-resident commercial lending is extremely difficult to secure with Spanish banks, except in rare circumstances
• Lenders generally only offer residential home loans, and assess each commercial application case by case

Need a commercial loan? Contact us to discuss your needs.