If you need a mortgage to assist you in buying a property in Spain, then you have two options:
- Re-mortgage or increase the mortgage on your home in the UK,
- Take out a new mortgage with a bank in Spain on your new home.
Re-mortgage your UK home
We would recommend the first option as being the best as this will definitely be cheaper regarding arrangement fees, although interest rates in Spain have proved to be a little lower than in the UK over recent years. Another advantage in re-mortgaging your UK home is that you can make the necessary enquiries before you come to Spain, so that when here, you will know that you have your finance already in place.
A Spanish Mortgage
Mortgages are available through Spanish banks for non-residents for periods of between 5 and 25 years. If you are a Spanish resident then you can get a mortgage for 30 years.
In theory it is possible to get a mortgage for up to 70% of the surveyed value of the property, although mortgages of 50% and 60% are more normal. If you choose to have a mortgage of 50% then the costs involved in purchasing the property can be added to the amount of the mortgage.
A mortgage has to be fully repaid by the time the borrower is aged 75. If you are aged 64 at the commencement of the mortgage, then you will only be able to get a 10-year mortgage.
As of Oct 2014, the typical interest rate for a Spanish mortgage is about 3.5% for a non-resident.
When assessing your application, the bank will want to see your last three months wage slips (your most recent P60 will be useful as well), or if you are self employed then the most recent three years of accounts plus an official tax statement. If you can bring with you copies of your bank statements for the last six months and/or a letter of recommendation from you UK bank, then this will also help. The exact list of the documents required will depend upon your circumstances, but we will be happy to give you individual advice on documentation prior to your visit to Spain.
When applying for a mortgage, the household income is assessed, and so if you have a spouse who is working, the bank will want to see their payslips/accounts as well.
In Spain, Banks can only release mortgage funds when you own your new home, which for a new property can only happen after the house has been completed. A new property may not be ready for several months and yet you will be expected to make payments of up to 75% of the value of the property at various stages before completion. To overcome this problem, the mortgage bank will give you a letter of intent to present to your own bank in the UK or your bank here is Spain (we will help you open a bank account). This letter of intent should be sufficient to arrange temporary bridging finance for the staged payments.
If your mortgage is for less than 50%, then it may be possible for us to negotiate one big final payment on completion with the builder to avoid the necessity of a bridging loan.
Approximate monthly repayments for a mortgage of 100,000 euros:
|Interest rate||Monthly repaymentover 15 years||Monthly repaymentover 25 years|
|3.5%||714.88 euros||500.62 euros|
|4.0%||739.68 euros||527.83 euros|
You should expect the costs of setting up a mortgage (set up fees, registration fees, valuation, Notary, etc) to come to about 3.5% of the amount of the mortgage if the mortgage is for over 50,000 euros, or a about 5% if the mortgage is under 40,000 euros.
Whilst the UK remains outside the euro, there is the added danger of a currency movement against you that will cause the monthly payments to rise. However, if you are planning to rent out the property for much of the year, then the currency change will be in your favour with regard this income thus offsetting the rise in monthly payments, and thereby minimizing the risk to currency swings.