Mortgages Explained

To some foreign residents, the idea of taking out a mortgage in Spain can seem pretty daunting at first. It shouldn't. Even if you speak no Spanish, there are banks and financial institutions based here which have English speaking staff and specialise in providing mortgage services for expatriates.

Most financial institutions will have a standard criteria before considering a mortgage application. For example, you have to be 25 years or over, in full time stable employment, or have been self-employed for a minimum of three years. How much you can borrow will depend how much income you receive and what financial commitments you have. In general, you can borrow up to 60% of the purchase price. In order to check that the price is appropiate and fair, the bank will request a professional valuation. This comprises a detailed report in respect to the quality of construction and material use, the situation, state of repair, etc. of the property and, most important of all, its market price which takes all the above into account. The fee for the valuation is approximately 400 euro but obviously varies according to the size of the property.

A search must also be made in the Land Register and a certificate issued for the corresponding entry to check on the possible existence of mortgages or liens.

If the home you are buying is still under construction, the builder may require the cost of the property to be paid in a series of payments. Most lenders can provide a mortgage that matches these requirements subject to certain safeguards.

In general, you can expect to pay approximately 11% of the property purchase price in associated taxes and fees when you have a mortgage. These include the following:

Notary fees:

These are established in accordance with the total amount of the loan. For example, if the mortgage is between €150.253 and €601.012, the notary fees will be 0,5 euros for every thousand euros.

Land Register fees:

The mortgage must be registered with the Land Register and, again, the fees depend upon the amount of the loan. For example, if the mortgage is between €150.253 and €601.012, the land registry fees will be 0,3 euros for every thousand euros.

Administration Office:

Otherwise known as the "Gestor" the administration office handles all the necessary processing of official documents. Their fee is approximately 250 euro. They will pay all the taxes on your behalf, as well as undertaking the above-mentioned registration in the Land Register.

Insurance:

This is established according to the minimum valuation received. It is obligatory to take out an insurance policy covering fire and Third Party responsability. it is also obligatory to take out a life insurance.

Taxes:

There is a tax required on all legal documents which is calculated according to the amount of the mortgage. The expenses relating exclusively to the bank are the commission for opening the account (normally 1%) plus the interest on the loan.

Naturally, all the figures stated here are subject to change.

To apply for a mortgage the following is required:

  • Copy of your latest tax declaration or proof of income from an accountant.
  • Statements of last 3 months from your bank account.
  • Details of your bank in your home country.
  • Photocopy of your passport.