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Is a Spanish mortgage preferable to one from my home country?

If you want to take out a mortgage on your prospective Spanish property it is usually preferable to do it with a local Spanish bank. Alternatively you could take out a mortgage in your home country to provide the financing for your Spanish purchase. Interest rates in Spain are reset 6 monthly or yearly with a straightforward set up procedure and quick valuations.

Spanish Interest Rates

In pre E.E.C.days and before the adoption of the Euro, Spanish investors were acustomed to receiving high returns on their deposits as inflation and a depreciating Peseta reduced their purchasing power. However, with E.E.C. central bank control and a stable Euro, interest rates have fallen dramatically from their peaks to the current rate of around 2%. With inflation at 2%, mortgage lending to foreigners is an established business with an annual variable mortgage interest rate of around 5%.

Costa Blanca Property For Sale

Apartments For Sale Costa Blanca
Villas For Sale Costa Blanca

Costa Blanca towns have seen a record number of new bank branches open in the last 5 years, with all the major Spanish banks being represented and many of the regional banks and savings banks ( Cajas de Ahorro ) also opening branches as they follow their clients to the coast. Strong competition has lowered the interest rate margin that they charge over the Euribor ( European Interbank Offered Rate ) so that mortgages today ( 2013 ) can be obtained for around 5 - 5.5%.

How much can a foreign purchaser borrow?

At present, on the Costa Blanca, the maximum for non-residents from most banks is 50% of their valuation of the property. The valuation fee of between € 300 - € 500 is deposited with them and the valuer visits the property, taking measurements and photos and collecting copies of the property documents from the agent. A formal offer will follow in about 2 weeks which should be the same as the initial calculation with regard to interest rate, repayment period, opening fee and monthly repayment.

The mortgage approval procedure

On first contact the bank can be given information about the prospective property, the price and location, allowing them to make an initial calculation giving the morgage interest rate, opening commission, number of years and monthly repayment. It will also give the interest rate review date which will usually be 6 monthly or yearly. Around 95% of Spanish mortgages are variable rate, calculated on a percentage over the EURIBOR base rate, with fixed rate mortgages not being popular due to their high interest rate premium.

Spanish banks accept proof of earnings from the U.K. ( P60, audited Company Accounts, pension statements) or from other E.E.C. countries. The information can be sent to them by fax and the precedure is further facilitated by it now being possible to open an account on application for an NIE number (foreigner's tax number). Funds can be transfered to the new account for the valuation fee and the formal mortgage offer will follow.

The Mortgage Deed

The bank director will attend the notary signing of the Title Deed for the property and this is immediately followed by the signing of the Mortgage Deed and the delivery of payment to the previous owner. The Mortgage Deed is in Spanish and will be verbally translated in the notary office by a named translator. Usually the A.P.I. agent or a lawyer will do this, although the bank will have previously explained all the conditions to the borrower. The Mortgage Deed is sent to the property registry at the same time and in the same way as the Deed of Purchase.

Spanish mortgage costs

Spanish mortgage costs are; 1) a setting up fee of 1 - 1.5%, 2) an early cancelation fee of 1%, 3) a valuation charge of between € 300 - € 500, 4) notary and registry fees of about € 600 and € 500 respectively. The banks and savings banks also require a minimum of fire insurance on the property but recommend insuring more.