Mortgages in Spain in 2017
With the property market on the rise again we are receiving many questions from our buyers on finance & mortgages for the properties they are interested to buy in Marbella.
Since the property boom in 2007, a lot has changed, so we thought it necessary to re-visit the subject and explore mortgages in Spain in 2017.
Today we will look into:
- 2017 Rates of mortgages in Spain
- Comparison between 2007 and 2017
- What banks lend to foreign home buyers
- What do you need to apply for a Spanish mortgage
- How much can you borrow
- Why choose to apply for a Spanish mortgage as opposed to a mortgage in your own country
- Why would you need a mortgage broker
2017 Mortgage rates in Spain
At the time of writing (April 2017) the mortgage rates in Spain are at an all time low of -0.11% so new mortgages are easier to come by at the moment.
Variable mortgage interest is commonly calculated as: Euribor + X% (where X is commonly between 0.75% and 2% depending on what bank you are dealing with. )
Banks & Mortgages, then and now.
Way back when ….
Back in 2007, during the property boom, there were a whole host of international banks to choose from. Lenders from countries such as Sweden, Switzerland, Holland & Norway were popular lenders, but none as popular as the British banks. Halifax Spain, Barclays Spain, Lloyds International Spain and Abbey National to name a few were a common sight on the Spanish high streets.
The British lenders were so popular because:
- All British banks were offering the best interest only mortgages in Spain. Spanish Banks did not offer these packages.
- There was no confusion on what kind of paperwork was needed to obtain mortgages
- Many Spanish banks don’t offer their contract in English, therefore, having your mortgage explained to you in your own language was a major factor.
- One could save money not having to contract a service such as a mortgage broker to translate complicated Spanish terms in order to sign up for a mortgage.
Once the crisis started back in 2010 the international banks were quick to pack their bags and leave. Refusing to lend any more and selling off their client base to national banks.
Halifax Spain was sold to Lloyds. Lloyds International then sold to Banco Sabadell who now own TSB.
Snapping back into the now….
Nowadays, if you want to get mortgages in Spain you will need to speak to a Spanish bank. And not every bank actually provides mortgages to foreign residents anymore!
Furthermore, interest-only mortgages are now a thing of the past.
However, now the property market is on the rise again, we do see more and more banks starting to offer mortgages again and increasing the products they have on offer, so it does pay to shop around a little.
The most popular banks that actively promote their mortgage services are:
Bankinter is one of the few Spanish banks that has always continued to offer a range of different mortgages at reasonable rates & terms. However, as with most Spanish banks, the details are provided only in Spanish, so bring a dictionary (or a translator) before you sign the dotted lines!
Here is more information (in Spanish) about the Bankinter Mortgages.
Santander is a familiar name for many international buyers. They offer a wide range of mortgages including fixed rate, tracker and combination deals.
To easily calculate your mortgage rates for Santander bank, click here
Even though Santander is available in many different countries, you will still need to speak to your local, Spanish, bank. However, Santander takes good care in employing English speaking staff in the areas where there are likely to be more English Speaking buyers. For contracts however, we always advise to consult an expert to translate before you commit.
BBVA seems to have their act a little more together when it comes to online mortgage advise. Their site is updates and in English and they have a mortgage calculator on their site so you can see what their rates are quickly and easily.
BBVA offer a fixed rate, variable rate, mixed rate and also show you the options for when you want to switch your mortgage to BBVA.
Click here to visit their English site.
The site even offers a “comparison” tool for property prices. Really handy if you want to check out the price you pay for a property is the right one!
La Caixa Bank
The La Caixa Bank also seems to be geared up to service foreign property buyers, especially when it comes to international users of their banking system. However trying to find information in English for their mortgages in spain online is still a bit of a struggle. Try here for a start. La Caixa bank offers a 20 year fixed rate mortgage for foreign buyers.
To see their terms in English, click here.
What do I need to apply for a Spanish mortgage?
Regardless if you are signing up for a mortgage through a broker, Spanish Bank or International Bank, you will always need the following documentation:
- NIE Number – this is a National Identification Number. You can get a NIE number from the Local Police station. If you have a Gestor (Accountant) they can get it for you.
- Proof of employment or income – This is your income back home and in Spain can also include your pension. However, if you are planning to purchase a property for rental income,(Buy to let, or BTL schemes) this potential income can not be used as proof on income for mortgage, unless you are a customer with an excellent financial profile.
- A Pre-Agreement with the seller – most banks need this to start the mortgage process. However, the Caixa bank is one bank we know of that does allow you to apply for a “non-binding” mortgage that is valid for up to 10 months. Keep in mind this “Pre-agreement” is essentially just a letter of intent that is subject to a property valuation and a re-assessment of the customers circumstances if more than 3months have passed since the initial application.
- Details of your current debts & mortgages (In Spain & elsewhere
- Copies of all your existing property deeds (in Spain and elsewhere)
- Records of your current assets (in Spain and elsewhere)
- Prenuptial agreements (if applicable)
What happens next?
Once you have applied for a mortgage and have submitted all the correct documentation, the bank will get back to you with a mortgage offer. This typically takes around 4 to 6 weeks.
Even though the times of “haggling your way to a cheaper mortgage” are long gone, keep in mind the first offer you will receive from the bank will not be their best offer, and you should always get back with a “counter offer”. It is beneficial to take your banks offer over to other banks to see if there’s a better deal to be had elsewhere. Which you can then use to better the offer from your original bank.
How much can I borrow?
The LTV (Loan to value) amounts differ per bank and per project, but in general you can borrow up to 70% with a 25 year loan term as long as the maximum age at the end of your mortgage is 75 years.
If you are a resident in Spain the amount you can borrow can be up to 80%.
Loan to Value means: The amount you can borrow is a % based on the value of the property. NOT the purchase price of the property. So if you are buying a property that is on sale for a much higher price than the actual value, you will get a lower mortgage from your bank.
The bank´s assessors will decide the LTV. You are free to get your own independent valuation, but ultimately, whatever the banks assessors valuation comes out on is what your mortgage will be based on.
The LTV is determined on the lesser value between the purchase price and valuation. This means that in the rare case of you buying a property that is valued by the bank at 100.000 but the purchase price is 80.000, the bank will grand you a mortgage based on the purchase price instead.
The additional costs that come with purchasing a property (deed duties, bank fees, notary costs, valuation fee, mortgage brokers fees and lawyers fees), are commonly around 14% of the purchase price of the property. (12% if you are a cash buyer). This cost can not be included in the mortgage. This means, if a property costs 100.000, your mortgage could be max. 70.000€, you will need to have a further 30.000 + 12.000(costs) = 42.000€ to complete the purchase.
Do I have to apply for a Spanish Mortgage?
You don’t have to, you can of course apply for a mortgage in your home country, but there are some advantages to getting mortgages in Spain instead:
- You are able to lend on a pension income
- Spanish banks offer short term mortgages (min. 5 years). You can get a flexible mortgage which means you can cancel the mortgage at any time without paying a huge penalty.
- Spanish Banks will do their own due diligence against a property. This means, if your bank does not approve the lean it is very likely there’s something wrong with the property and therefore isn’t worth buying.
- Low interest rates are a big advantage allowing you to get more for your money today.
- If your liquid funds are in a currency other than Euro, you could fund some of the property sales price by getting a Euro Mortgage. This means you can offset any currency fluctuations when it comes to sending funds to Spain to cover deposits & costs.
Why do I need a mortgage broker?
You don’t need a mortgage broker if you have the time to compare the different offers from different banks, speak the Spanish language. However, if you find the Spanish jargon on contracts a tat too exciting, and would rather an expert looks after your contracts for you, you will need to speak to a mortgage broker.
There are many mortgage brokers in Spain, especially in the Costa del Sol area, so you need to shop around a bit to find the right one for you.
A popular mortgage broker is Fluent Finance Abroad, based in San Pedro de Alcántara. Another popular broker is IMS Mortgages who offer a free initial consultation to help you understand what their services are all about.
If you think you can manage with the contracts and legality you still might want to use a mortgage brokers services. Why? For one very simple reason. They know the market, they know what banks are giving good rates and they usually know the bank managers personally, which is a huge plus, especially in Spain.
A good mortgage broker will definitely save you time and money. In fact, they will promise that the money they saved you on getting the right mortgage was more than the actual cost of the mortgage broker.
Many Spanish banks do not offer set mortgage packages. Instead, they work on a client to client basis. Assessing each client individually. This means, you need to be able to negotiate, and who better to do this than the person who does this for a living!
The costs to having a mortgage broker on your side will be between 0.5% to 1%of the overall purchase price.
Be aware of scammers & fraudsters out there though! Especially so if you are being asked for an up-front fee. This is not uncommon, but make sure you know who you are paying your money too.
The best way to find out if the broker you are working with is reputable is to do a quick search online, ask your estate agent for recommendations and ask around to friends, neighbors or Facebook groups on reviews and other people who have had to deal with the company.
If you are ready to purchase a property in the South of Spain and would like some free advice on who to speak to when it comes to applying for your Mortgages in Spain, why not come to our office in Nueva Andalucia. Our coffee is fresh, our staff is helpful and together we can ensure you find the right property and the best services to help you complete the purchase. So contact us today!