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A new home for UK nationals, resident and self-employed in Spain

I was contacted by a UK couple who had lived and worked in Spain for many years. Currently renting, they were looking to buy a property as their main – and only – home in Spain. They had contacted the bank where they held their personal and business accounts and been disappointed to be told that they did not qualify for the mortgage amount they needed. They had already found their “perfect” property and this negative response from the bank they already worked with came as an unwelcome surprise.

What did they need?

The clients had saved a 20% deposit, so needed a mortgage of 80% of the property price. As long-term Spanish tax residents buying their main home, this is a possible scenario (for non-residents and/or holiday/investment properties the maximum is generally 70%). They worked self-employed with an established business and were able to provide business accounts, bank statements and several years’ Spanish tax declarations.

Key Characteristics

Client – married couple

Property location – Denia (Alicante)

Purchase price 200,000 euros

Mortgage required: 160,000 euros

LTV: 80%

What was the problem?

This is the first question I ask when a client says they have been declined a mortgage by their own bank. And the answer is usually to be found in the paperwork. For self-employed people (or people who run their own limited company) banks generally look at the average income over the last two to three years to assess affordability. And on this basis, they would qualify for a maximum of two thirds of what they needed – so not a surprise that their bank had declined their application.

What could I do about it?

Talk to the banks. While all banks in Spain (as elsewhere) have a similar approach to assessing mortgage affordability (what is your income? how much are you already spending on credit or other commitments?), there can be differences in policies as well as different degrees of flexibility applied. At Mortgage Direct we work with a wide range of banks and know which ones are more likely to be open to a particular case. And as we work closely with them and bring them business, they may show us more flexibility than they would to a client who approaches them directly.

And the solution?

By approaching the right banks and explaining the situation, we were able to find a bank who would make their assessment just using the most recent tax return along with the business accounts for the period since the last annual declaration (and so not yet showing on any tax return). As the business profitability was growing year by year, this approach allowed the bank to justify offering the full 80% mortgage required. 

What happened next?

With the mortgage approved, a valuation was quickly arranged and, in liaison with the bank and the client’s solicitors, the process through to completion went smoothly, resulting in happy clients who, after many years renting and saving for a deposit, were finally able to buy their own home in Spain.

And the conclusion?

I would love to say that we can get every mortgage approved, but I’m afraid I can’t! However, with our deep relationship with a broad range of banks as well as our experience and expertise in our profession, Mortgage Direct’s team can often find a way to help our clients get the mortgage they need to buy the home they want.

Steve Kennedy Mortgage Adviser

Steve spent many years in Spain, working first in teaching English for business in Barcelona, then in property sales in the northern Costa Blanca. He then moved to the UK where he worked for HSBC bank for twelve years as a fully qualified mortgage adviser. He has returned to Spain to work with Mortgage Direct

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Mortgages taken out in currencies other than the currency in which you earn are considered Foreign Currency Mortgages. Changes in the exchange rate may therefore increase the equivalent value of your debt. Under the Mortgage Law 5/2019 banks in Spain have introduced mechanisms to protect consumers from exchange-rate risk. For more information, please speak to your broker.

Mortgage Direct, S.L. is a company registered in the Registro de Intermediarios de Crédito Inmobiliario del BdE with the nº D108.

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