Taking a Spanish mortgage in name of a Company
Over the past few years, the benefit of buying property in Spain through a company has diminished, and most buyers now look to purchase in a personal name. Nevertheless, for some purchasers, buying through a company remains the right route.
Mortgages for company purchases come with some limitations and specific requirements. One key reason to consider borrowing through a Spanish SL is if you earn income in a currency not covered by lenders in Spain.
Company loans often come with higher bank arrangement fees. Interest rates are also higher than for a personal-name purchase
Contact us to find out about availability for company-name mortgages.
Company ownership of a Spanish property can have benefits — for instance, if the property is to be used to generate income from regular rentals
- It can also help overcome currency-of-earnings issues
- Allows running costs to be offset against income
- Can help you obtain rebates on some Spanish taxes, like IVA
- Since the economic banking crisis, many banks have withdrawn mortgages for non-resident company purchases
- Lending for a Spanish SL is more widely available
Why are Spanish Banks of loans less likely to grant a loan in a Company
Files for loans granted in a company’s name are more likely to be pulled and scrutinised in the event of a Bank of Spain audit — first for money laundering or tax evasion checks, and second because the file must show a higher level of due diligence, making this type of lending more complicated overall.
- Legislation requires the bank to confirm each year that the company remains financially viable, with no infractions or bankruptcy proceedings under way
- The repossession process can also be more complicated, particularly where the property is owned by a trading company that is also non-resident
For risk purposes, a higher level of funds must be held against a company loan on the bank’s balance sheet, compared to a personal-name mortgage.
Company loans can overcome access issues for clients who earn in currencies not covered by non-resident lending in Spain.
Buying property via mortgage in a resident Spanish SL
Spanish limited companies (SLs) can obtain a mortgage in Spain. It’s normal for the SL to be dormant, created solely as a holding structure for the asset. Banks tend to look more favourably on structures that include an SL — a wider range of banks will consider a loan on this basis than where no SL is involved.
- The loan is granted to the company
- All shareholders of the SL must act as guarantors
- A Spanish SL must have a minimum of two shareholders
- Affordability is based on the personal situation of the shareholders, and normal criteria apply
- The SL must be set up before a mortgage application can be made
- Monthly and yearly tax returns and accounts are necessary, even if the SL only holds an asset
- Expert advice should be taken on the cost of setting up and running a Spanish SL
Maximum loan-to-value may be limited to 60%, with a 15-year term
Buying and a loan for a non resident company
Purchasing Spanish property through a non-resident company is possible. The company can be an existing one, a trading company, or a new company set up solely to hold the asset.
- The non-resident company can hold the property directly, or via a Spanish SL that in turn holds the asset
- To both buy the property and arrange a mortgage for a non-resident company, the company will need a non-resident fiscal number in Spain — for individuals this is the NIE, for companies it’s a CIF
- The articles, deeds, and shareholder certificates are required to obtain the CIF, along with certificates from government departments confirming the company is set up according to the law
- All documents must be translated into Spanish and carry the Hague Apostille stamp
- At least one shareholder will need Power of Attorney, allowing them to act on the company’s behalf in all matters relating to the purchase
NIE certificates are also required for all shareholders, since they must act as guarantors
Risk process for assessing a loan in a Company name
The loan deed is recorded in the company’s name, as the company is the legal owner. However, the financial data used to assess the loan rests on personal guarantees from all shareholders — loans based on the company’s own fiscal position are not possible.
- Most companies owning property in Spain are just holding structures
- Mortgages are assessed against the personal incomes of the owners, not the performance of the company itself
- Any documents required for the application will reflect this
- Guarantors are personally liable for loan payments
- All shareholders must present their personal documents, including ID, tax returns, credit files, and bank statements
- A mortgage can’t be used to buy shares in an existing company — it can only be raised to directly buy the property
Need to understand more about buying and borrowing in a company name? Ask your question and our expert advisers will help.
Due diligence on Mortgages for companies
Applying for a mortgage in Spain in a company name requires additional paperwork. Because the loan is in the company’s name but the risk assessment is based on the guarantors, the level of documentation and due diligence is always high. As part of the application process, the paperwork needs to cover the legal aspects of the ownership structure, the fiscal viability of the company, and the personal debt and income information of the individual owners.
- All deeds and certificates showing incorporation of the company and its owners, stamped with the Apostille for non-resident companies, will be required
- The CIF certificate is also required, whether it’s a non-resident company or a Spanish SL
- Financial data is needed if the company is trading, including two years of accounts and a balance sheet
- Corporate tax returns are required where the company is existing or trading
- Company bank statements from the last six months, showing fiscal activity, are required where applicable