Spanish Mortgage Costs

Until 2019, lenders in Spain could pass on all mortgage costs to the borrower — a practice not seen in most other EU countries. Since June 2019, EU-aligned legislation has required Spanish banks to cover several of these costs themselves, including AJD (mortgage deed tax), notary fees, and land registry costs linked to the deeds.

For clear and concise advice on the costs of arranging a mortgage in Spain Contact us today

Spanish Bank fees

Banks in Spain typically charge a one-off fee for completing the mortgage, known as a bank arrangement fee, closure fee, or completion fee. This fee is only payable when the mortgage funds are drawn down — it isn’t charged at application stage, and it doesn’t apply if you don’t go on to buy a property or take up the loan on offer.

• Bank fees cover the cost to the bank of setting up a new mortgage in Spain.
• All new Spanish mortgages require funds to be passed to the bank’s balance sheet to cover part of the risk
• Banks use part of the fee to ensure the loan remains profitable in its first year.
• Fees generally range from 1% to 2%, taken from the gross loan amount at completion.
• The bank fee can’t be added to the loan amount if the maximum loan-to-value has already been reached.

All bank arrangement fees are included in your TAE (the annual percentage rate), allowing you to compare one offer directly against another.

Valuation fees

Valuation costs for a mortgage in Spain can vary slightly, depending on how much of the fee the bank subsidises and whether the bank is looking to make a small profit on the transaction. Generally, a valuation instructed through a bank works out cheaper than appointing one privately.

• By law, banks in Spain must accept any valuation, provided the valuation company is registered with the Bank of Spain.
• It’s unlikely you’ll achieve any cost benefit from instructing a valuation yourself.
• The valuation must be specified for mortgage purposes in order to be used for lending requirements.
• Spanish banks will require a provision of funds to be transferred to them upfront to cover the valuation.

Once the valuation certificate is produced, any additional cost is charged to the client’s account, or any surplus refunded. The final valuation fee is determined by the property’s assessed value — as a rule of thumb, you can expect to pay around 0.10% of the property’s value.

Valuation fees typically start at a minimum of €350.

Notary and Land registry fees

When buying and borrowing in Spain, you’ll have two deeds: the purchase deed and the mortgage deed. Each attracts costs for signing at the notary and registering at the land registry — though the Spanish bank covers the cost of the mortgage deed itself.

• Spanish banks either manage the registration process themselves or appoint a third party to handle it.
• Registration must be accurate to protect the security of the loan, which is why lenders keep control of the process.
• Notary and land registry fees for the purchase deed are based on a national scale, according to purchase price and loan amount bands.
• Land registry costs can vary depending on the complexity of the registration and the cost of any third party involved.
• Each bank retains a provision of funds from the gross loan amount to cover registration costs.
• Once registration is complete, all invoices are sent to the mortgagee — any surplus funds are refunded, or any shortfall deducted from the holder’s bank account.

Because some costs, such as land registry fees, aren’t known in advance, it isn’t possible for the funds withheld on completion day to be 100% accurate.

Insurance costs another linked products

Some banks take an amount at completion to cover insurance, spanning anywhere from 1 to 5 years. Interest rates may be linked to taking out these products, which will normally include buildings insurance — a legal requirement when contracting a Spanish loan.

• Life cover costs, where applicable, are confirmed at application stage.
• Buildings insurance costs are confirmed after valuation, once the rebuild figure is known.
• Lending offers set out the exact premiums for any linked products.
• Compulsory linked products are no longer permitted.

Lenders wishing to sell additional products are required to also offer terms without them, so borrowers can decide which option works best for them. All bank-related costs must be amortised and reflected in your TAE.

For more information on the costs of a Spanish mortgage, contact us.

Broker or advice fees

Using a broker in Spain can save you time and money, help you avoid misunderstandings caused by language barriers, and give you access to a wider range of products. Independent brokers will generally charge a broker fee.

• Brokers can charge upfront fees for their advice.
• It’s better for you if fees aren’t payable until a suitable financial approval has been secured.
• Broker fees, and when they’re payable, should be clearly stated in writing.
• Brokers in Spain fall into two categories, and are obliged to state which type they are: those who only work with one or two lenders, and those with access to the majority of the market.

Different regulatory rules apply depending on which category the broker falls into.

We make no charge for advice on Spanish mortgages, nor for making an application through to a fully underwritten financial approval. For more information on our independent services, contact us today.