Home > Spain > Mortgage Information

Spanish Mortgage Information

Property abroad offers many benefits not available in the UK such as much lower prices, good rent potential, excellent investment, good alternative/addition to a pension, not to mention the great weather! However when you are dealing with a new country, you need to make sure that you fully understand what you are getting yourself into.

 

The main criteria for a mortgage in Spain is as follows:-

 

All decisions to lend are based on affordability at 33%-40% of net income available after all outgoings have been deducted (including the new loan in Spain)

Documentation will be required, confirming income, expenditure and credit worthiness.

Must have a Bank Account in Spain in order for your mortgage payment to be debited

The maximum loan for non-residents is 80% of the property value, although the normal rule is 70% and products are more favourable at this amount of borrowing

NO loans can be accepted for the purchase of land for a self build project.

Maximum age limit at the end of the mortgage term cannot exceed 70 years.

Interest Only is not widely available, although some lenders are starting to introduce products for the investment market that may suit this type of repayment method.

Life cover is not essential, although recommended to protect you and your family. The same applies to Buildings and Contents Insurance.

 

Fees

 

Lenders in Spain normally charge approximately 1% of the borrowed amount as a completion fee, although this does vary from lender to lender. However, the maximum you should ever pay is 2%.

Valuation Fees will be charged by the lender and these will be dependent on the property value. An average €200,000 property will cost around €350 euros.

You have two taxes and two fees to pay on the transfer of property. The two fees are for the notarization of the deed and for its registry in the property registry. The two taxes are the transfer tax and a sort of capital gains tax on the increase in value of the land, usually called the plus val’a tax. The transfer tax, called Impuesto de Transmisiones Patrimoniales in Spanish, is 6 per cent of the value declared in the contract. This ITP is charged on private sales. If you purchase from a property company, this tax will be IVA (value added tax), at 7 per cent because the sale is a business operation, not a private deal between two individuals.

 

In addition to this, you pay a documents fee, or stamp duty, of one half of one per cent, so buying a new property will draw tax of 7.5 per cent. All fees will generally equate to around 10% of the property value. All these things need to be taken into account when working out the budget for your purchase, as these Fees cannot be added to the loan.

 

 

Mortgage Broker

Some people think about the costs involved in using a broker and wonder if they really need one to act for them. If you have Banks that you can go to direct, then why pay someone to do it for you. The experienced broker can pull things together for you and ensure that problems are dealt with before they arise, because they have dealt with this process many times and are aware of the potential pitfalls.

Most brokers will only charge a small fee for their service, as they may also receive remuneration from lenders. The customers that have used a broker have said that this is a small price to pay for reducing the hassle and stress that is involved in any property purchase and take care of all aspects of the transaction as well as offering advice on the process and products available. Brokers DO add value.