Spanish Mortgage Products

We achieve exclusive mortgage products with Spanish and foreign banks

ABOUT OUR MORTGAGE PRODUCTS

EXCLUSIVE CONDITIONS

Spanish bank procedures and mortgage products are different to those in other countries. Due to our long-standing relationships with the lenders, we offer expert guidance on the process of applying for a mortgage and exclusive conditions with rates not offered publicly from Euribor + 1.35%, fixed rates from 2.15%, mortgages without life insurance, and terms up to 25 years or age 75 if earlier.

CONSTRUCTION MORTGAGES

Construction mortgage products

For this type of mortgage, the best products are where the banks will offer a loan against the plot of land (up to 50% of the cost, or value of lower) and also for the construction works (up to 70% of the cost, or value of the project, if lower).

In all cases, applicants must own the plot of land outright before any bank will lend. It is possible to purchase the land and sign for the mortgage at the same time, but most clients buy the land first. With the best products, the banks will pay up to 50% of the cost of the plot (or value if lower) as the first installment, but usually only once the works have started.

It is necessary to have all the paperwork relating to the construction project ready at the start of the formal mortgage application process. This will include the architect’s plans for the project (stamped by the College of Architects), building license and detailed quotes from the construction companies that will carry out the works. A specialist valuer will assess the project as a whole and the banks will base their lending on the valuer’s report.

We have arranged many construction mortgages over the years and can offer expert guidance on the process. If you are interested in this type of mortgage, we would advise that you contact us as soon as possible.

HOLIDAY HOME MORTGAGES

Holiday home mortgage products

Holiday home mortgages are generally for non-resident property buyers who do not live in Spain The maximum borrowing amount is up to 70% of the property purchase price (or valuation if lower).

Lenders offer fixed, variable and, in some cases, mixed rates. For variable rate mortgages, the rates are based on the annual Euribor reference rate with a percentage margin added to this, for example, annual Euribor + 3%. We can currently offer mortgages with rates as low as annual Euribor + 1.35% or fixed rates from 2% for premium, non-resident clients (please enquire to see if you would qualify). Typically, for other clients, the rates will be a little higher than this (from Euribor + 1.9% and 2.15% fixed) but still lower than publicised rates or if you go directly to the banks.

PRIMARY RESIDENCE MORTGAGES

Primary residence mortgage products

Primary residence mortgages are for those where the property in Spain will be their main residence and they already pay their income tax here, or in exceptional cases are about to start paying taxes here. For this type of mortgage, it is possible to secure mortgages up to 80% of the property purchase price with rates from Euribor + 0.99% or fixed rates from 2.05%.

INVESTMENT MORTGAGES

Investment mortgage products

Investment mortgages are for those property buyers planning to rent out their property after purchase, or where the buyer already has at least one existing mortgage in Spain. If the banks believe that the property will not be for sole use by the owner or that a commercial activity will be carried out there, they would normally treat it as an investment mortgage. Generally speaking, banks will only offer 50-60% of the property purchase price (or valuation if lower) for these types of mortgages.

We have provided alternative finance solutions for property buyers who may have a sophisticated investment portfolio. We can help put together back-to-back loan arrangements secured against listed investments. This can be where the lender takes over as custodian, or where a guarantee is provided by the existing custodian of the assets.

COMMERCIAL MORTGAGES

Commercial mortgage products

If you are buying a property that banks will class as a commercial premises (offices, shops, hotels, B&Bs etc.), we can offer mortgages to suit your purposes. The mortgages available are generally 50-60% of the purchase price (or valuation if lower) and conditions differ from those for residential properties.

Where a property is being bought by an actively trading company, or if the company will trade after the purchase, the banks will also treat it as a commercial mortgage.

Some banks will allow you to purchase through a newly formed Spanish limited company (Sociedad Limitada or “SL” company). If the company is set up as a shell company for the sole purpose of buying the property, meaning it will not actively trade after the purchase, it can be possible to secure mortgage terms that would apply for a residential mortgage. Due to the additional work involved in assessing companies, banks are more reluctant to approve this type of operation. Generally, they will only look at such cases when the companies or individual(s) behind them have strong profiles.

MORTGAGE CONDITIONS

You should be aware of the different mortgage conditions offered by lenders in Spain.

MAXIMUM BORROWING
DEBT TO INCOME RATIO
MAXIMUM TERM
INTEREST RATES
REDEMPTION PENALTIES
INSURANCES

MAXIMUM BORROWING

The maximum borrowing amount is first of all determined by the loan to value ratio. The loan to value concept refers to the ratio of the mortgage amount to the property purchase price (or valuation if lower). Non-residents buying holiday homes can borrow up to 70% of the purchase price (or valuation if lower). For fiscal residents (those paying Spanish taxes) the maximum mortgage is up to 80%.

DEBT TO INCOME RATIO

To determine what you can borrow, lenders look at your ability to pay – debt to income ratio (DTI). Typically, banks require that you allow around 1/3rd of your net monthly income after tax to pay for all worldwide debts and significant expenses (including the new Spanish mortgage).

MAXIMUM TERM

The maximum term for a mortgage in Spain is 25 years and there are various options for different terms. However 75 is the maximum age accepted by lenders. So if you are 55 years old, the maximum term would be 20 years.

If you are over age 60 and in receipt of a pension, you can still have a mortgage in your own name, although the same criteria relating to the maximum level of debt-to-income will apply. It is also possible to use a guarantor such as a family member to secure your borrowing, which can also have potential inheritance tax benefits.

INTEREST RATES

All lenders base their mortgage interest rates on the annual Euribor reference rate with a percentage margin added to this, for example, annual Euribor + 3%. We can currently offer mortgages with rates as low as annual Euribor + 1.35% or fixed from 2.15% for premium, non-resident clients (please enquire to see if you would qualify). Typically for other clients, the rates will be a little higher than this (from Euribor + 1.9% and 2.5% fixed) but still lower than publicised rates or if you go directly to the banks. Mortgage Direct has some control over rates that can be offered due to the relationship it has with several banks.

Interest-only is not currently available, apart from during the first couple of years with some construction mortgages. To keep the monthly repayments down, in the absence of interest-only mortgages, we recommend opting for the longest possible term. This actually gives more flexibility over the amount you repay every month.

REDEMPTION PENALITIES

It is possible to make overpayments or to pay off the mortgage in full. The charge for this is 0.5% of the amount paid off (partial or full redemption) during the first 5 years and 0.25% thereafter. As an example, for every €10,000 paid off early, the maximum redemption penalty in Spain during the first 5 years is €50. After the first 5 years, this reduces to €25.

For fixed interest rate products, the penalty may be higher depending on various factors.

INSURANCES

Most banks insist that you take out their own household and building insurance as well as a life cover policy. That is unfortunate as it is not relevant for all property buyers looking for a mortgage in Spain. The good news is that we are aware of the banks that don’t make this a priority without loading the interest rate by not taking it.

MAXIMUM BORROWING: MAXIMUM BORROWING

The maximum borrowing amount is first of all determined by the loan to value ratio. The loan to value concept refers to the ratio of the mortgage amount to the property purchase price (or valuation if lower). Non-residents buying holiday homes can borrow up to 70% of the purchase price (or valuation if lower). For fiscal residents (those paying Spanish taxes) the maximum mortgage is up to 80%.
DEBT TO INCOME RATIO: DEBT TO INCOME RATIO

To determine what you can borrow, lenders look at your ability to pay – debt to income ratio (DTI). Typically, banks require that you allow around 1/3rd of your net monthly income after tax to pay for all worldwide debts and significant expenses (including the new Spanish mortgage).
MAXIMUM TERM: MAXIMUM TERM

The maximum term for a mortgage in Spain is 25 years and there are various options for different terms. However 75 is the maximum age accepted by lenders. So if you are 55 years old, the maximum term would be 20 years.

If you are over age 60 and in receipt of a pension, you can still have a mortgage in your own name, although the same criteria relating to the maximum level of debt-to-income will apply. It is also possible to use a guarantor such as a family member to secure your borrowing, which can also have potential inheritance tax benefits.
INTEREST RATES: INTEREST RATES

All lenders base their mortgage interest rates on the annual Euribor reference rate with a percentage margin added to this, for example, annual Euribor + 3%. We can currently offer mortgages with rates as low as annual Euribor + 1.35% or fixed from 2.15% for premium, non-resident clients (please enquire to see if you would qualify). Typically for other clients, the rates will be a little higher than this (from Euribor + 1.9% and 2.5% fixed) but still lower than publicised rates or if you go directly to the banks. Mortgage Direct has some control over rates that can be offered due to the relationship it has with several banks.

Interest-only is not currently available, apart from during the first couple of years with some construction mortgages. To keep the monthly repayments down, in the absence of interest-only mortgages, we recommend opting for the longest possible term. This actually gives more flexibility over the amount you repay every month.
REDEMPTION PENALTIES: REDEMPTION PENALITIES

It is possible to make overpayments or to pay off the mortgage in full. The charge for this is 0.5% of the amount paid off (partial or full redemption) during the first 5 years and 0.25% thereafter. As an example, for every €10,000 paid off early, the maximum redemption penalty in Spain during the first 5 years is €50. After the first 5 years, this reduces to €25.

For fixed interest rate products, the penalty may be higher depending on various factors.
INSURANCES: INSURANCES

Most banks insist that you take out their own household and building insurance as well as a life cover policy. That is unfortunate as it is not relevant for all property buyers looking for a mortgage in Spain. The good news is that we are aware of the banks that don’t make this a priority without loading the interest rate by not taking it.

Mortgage Application

We will guide you safely through the mortgage process