Buying in Spain. Know your maximum budget. Have your loan approved. Negotiate with sellers from a position of strength. Feel safe to move quickly without risk. Contact us today for guidance on how to obtain a full pre-approval for a Mortgage in Spain.
Why am I best getting independent information when arranging a Mortgage in Spain.
Spanish Banks do not always have set criteria’s and rates and some allow their Branch Mangers to define rates and costs for the Spanish Mortgages within certain guidelines as long as these do not go below the minimum set by Head Office. This means that if you visit one Branch of a Spanish Bank, one Manager may offer a better deal on Spanish Mortgages than if you ended up in another branch of the same Bank. An company authorised to place business across a range of lenders and negotiate on your behalf can help ensure you have access to the bets possible solutions.
At IMS we will provide you with free access to information and no obligation fiscal approvals in principle for Spanish Mortgages. This means before you go house hunting you will know what your maximum budget is, have your finances sorted, know what cash deposits you will require and how much the entire purchase process will cost with no nasty surprises or misunderstandings at a later date.
New regulation impacts on timescales
Regulation implemented in June 2019 means signing of the mortgage Spain offer must happen at least 10 days before completion. Also registration of this at a central notary office. Undertaking the mortgage process before you commit is therefore important. Completion dates are specified in the purchase contract. Deposits are paid at point of contract. In conclusion starting the fiscal approval before finding a property will shorten the overall time to offer. This allows you to move forward quickly and safely.
We can provide you with access to all options for a Mortgage in Spain. Ensure you have access to a regulated mortgage professional for your application. You will have access to the majority of the market providers. Informed on the benefits and drawbacks options. Explanation of the product types , in a clear and concise manner.
Loan to values for non residents applying for Spanish mortgages
Spanish mortgages are granted as a percentage of valuation or purchase price. This is then the lower of the two. Maximum loan to values are 70%. Some lenders limit this to 60% for non tax residents of Spain. Also applicants living outside the EU.
Term you can expect for a mortgage in Spain
Maximum terms for a Spanish Mortgages range from between 20 to 30 years. Age restrictions do apply which can vary from Bank to Bank and range from age 60 years to age 75 years. Spanish Banks prefer non resident loans are maximum 20 years.
Types of loans available in Spain
Standard repayment loans are the main product in Spain. Interest only has disappeared from the market. This loss of interest only facilities has happened under pressure from the Bank of Spain.
Fixed rate loans loans are available. Now offered by nearly all Banks in Spain they have become increasingly more widely available. Fixed rate Mortgages in Spain are generally for the full term and available at competitive rates. Due to a low Euribor, which variable rates track, the fixed rates are higher than the variable rates but will provide long term stability. Most fixed rate loans have higher early redemption penalties than the variable rate products.
Buy to let mortgages, using rental income as part of the affordability assessment are not available but the Banks in Spain do not prevent you from renting out the property.
Loans for self builds are limited. Up to 70% of build costs. One lender up to 70% of total cost. Also the land must be owned outright. Mortgages for the purpose of buying land in Spain is not possible.
How Spanish Banks assess affordability ratios for a Spanish mortgage
Spanish Banks work off affordability ratios based on net not gross income.
Incomes must appear on personal tax returns.
Very few Spanish Banks will consider net profits from a company and not all Banks will consider all the full dividends taken by self employed.
Treatment of existing buy to let mortgages and rental incomes varies considerably from Bank to Bank. A few Spanish Banks will not lend to individuals with more than one investment property in the UK and calculation of the debt outgoing versus rent coming can sometimes make it difficult for buy to let landlords to meet affordability ratios for some of the Banks.
Most Banks will consider 100% of after tax net income but a few limit this to 80%, and some have minimum earning levels. On average to comply with general criteria for gaining a mortgage in Spain your monthly outgoings on loan and debt payments including the new loan will need to be less than 35% of your net income.
Affordability is the main underwriting criteria. Criterias do not relax at lower loan to values. Neither is asset wealth in isolation considered by the Banks in Spain.
Interest Rates for Spanish non resident mortgages
Variable loans are available. Alternatively full term fixed rates. Variable rates are based on a margin above the 12 month Euribor. The margin charged differs between Banks. Compulsory products and bank charges also vary. Banks can link compulsory products to the rate offered. Therefore all elements must be considered. Lenders must offer the option of a rate without linked products. Unless fixed loans are reviewed against the Euribor at review date. Check our best buy tables today.
First year premium rates and floor rates attached to Spanish Loans
A few Banks charge a higher first year rate than the variable rate would be, this then reverts to variable in Year 2. Some Banks previously placed a minimum rate ( floor rate ) within the mortgage deed. The floor rate was then the rate below which your overall rate will never fall immaterial of how low the Euribor itself drops. This practice has now stopped.
Early repayment penalties for a mortgage in Spain
By law from June 2019 early repayment penalties cannot exceed 0.25% for the first 3 years. Or the option to have a penalty of 0.15% for 5 years. Thereafter in both instances the penalty is 0%. This is for partial and full overpayment. For fixed rates the maximum redemption penalty increases to 2% for the first 10 years and 1.5% thereafter. However this is a percentage of the rate loss or capital paid. But the lower of the two. Rates have to be lower for it to apply. Early repayment penalties are open to negotiation for partial overpayments. Some lenders have lower penalties than the law. Also some have no early payment penalties at all.
Costs of completing on a Spanish Mortgage
All Banks charge a fee known as the Bank opening fee or Bank arrangement fee. This fee is taken from the loan amount at completion. Fees for Banks range from 1% to 2% of loan amount.
Other fees associated with a loan in Spain include the valuation fee. Arrangement fees are taken from gross loan amount at completion. No fees nor any purchase costs can be added to loan if the loan to value restriction has been reached.
- Valuation fees average 0.10% of value
Spanish Land classifications and other possible loan restrictions
Banks will lend against property on Urban land. Very few banks will lend on property registered as Rustica or any other classification, and if they do it will be at lower loan to values. When applying for a loan it is best to check the Nota Simple of any potential property early on in the process to check the land status.
Very few Spanish Banks currently offer either construction loans or loans for large reforms. Where they do loan to value restrictions will apply and rates are likely to be higher.
Home buyer valuations for a Spanish Loan
Valuations only account for meters registered at Land Registry. Overbuilds or extensions not registered will not apply. Therefore changes to the property not registered will not be valued for mortgage purposes. Lenders use their appointed valuation company. Under new legislation you may be able to select a valuation company. In the instance they a registered company under the Bank of Spain.
Standard Bank valuations are like home buyer reports. However they are not a structural valuations. Neither does the Bank valuation indemnify the buyer against future problems. Very few valuation companies offer structural valuations with full indemnity. If you require this service we can help organize one.
Spanish Mortgage deeds
In the absence of a consumer credit act, loans are written into a legally binding deed. This is signed by all parties at completion. It is not possible to change the terms within the deed after signing. You are bound by the terms under law. Changes to the deed, beyond an agreed reduction in rate, movement to a fixed rate or extension of term, requires a new deed. Mortgage costs apply again.
Novacions, so changes that can be made without a new deed will hold a maximum cost of 0.15% first 3 years, and no cost thereafter.
In Spain it is possible to take over or subrogate an existing loan held against the property. Due to terms on historic loans many Banks have stopped offering this facility. However the option can be explored. In order to see if a loan exists against the property you are buying. Firstly what are the terms. What capital is outstanding. Would the current banks consider subrogation. The key benefit of subrogation used to be it avoided having to pay mortgage deed tax. With all Banks now picking up this cost, subrogation is less beneficial.