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Mortgages in Spain 2024

Whether you have decided to move indefinitely to Spain, or you want to buy a vacation home, you’ll be happy to hear that securing a mortgage might not be as challenging as you think. The key to getting a mortgage in Spain is understanding how the Spanish mortgage market works, how much you can borrow and how to approach the application process to get the best results. If you’re looking at mortgages in Spain, the type of mortgage you apply for will depend on your particular circumstances.

 

Deciding what type of mortgage suits your circumstances best requires careful consideration, taking into account your short, medium and long-term plans. Mortgages Direct have put together a short guide on the different types of mortgages in Spain, to help you decide which is the most suitable for you and what requirements you need to meet in order to organise one.

This article is written by Mortgage Direct SL.

Mortgages in Spain

Holiday home mortgages in Spain

Holiday home mortgages are generally for non-resident property buyers who do not live in Spain. Fortunately, there are many Spanish mortgages are available for foreigners and Spanish expats. 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.

Construction mortgages in Spain

There are many different ways to finance a construction or refurbishment project. The type of financing will depend on the status of the project and your overall ambitions.

 

These types of mortgage are very different to a standard mortgage and can come from either traditional retail banks, as well as private lenders.

 

  • You will already need to have sufficient funds as the lender will not finance the whole project. This includes not only the down payment but also professional fees, taxes and some of the construction costs. 
  • It is also important that you have surplus funds to ensure that the ongoing costs can also be met when waiting for stage payments to be made available by the lender.
  • If you are lucky enough to already own a property in Spain and are only looking to finance some refurbishments, then financing is also available. The documents required by the lender will be based on how much refurbishment work you are looking to undertake. If for example, you are looking to do works that do not require planning permission, then the lender may only require quotes from a recognised building company. If the project is more extensive, then much of the information that follows in this article will apply.

Underwriting procedures

An important point that you need to be aware of is that the banks underwriters will not underwrite applications until a valuation has been carried out, especially on construction mortgages. This is so that they are aware of the value of the plot and the project costs before they make an assessment on your financial profile.

 

It is therefore important, not only to have a qualified professional make a thorough assessment of your financial profile, but also analyse the project and valuation itself. Some banks might provide initial pre-approvals, but these are not binding.

 

Minimum documentation is required for construction and some refurbishment mortgages, aside from the usual documents to prove affordability:

 

  • Lenders will require copies of the Proyecto de Ejecución (Project of Execution)
  • Licencia de Obra (Building License)
  • The Presupuesto (quote) from the main contractor with a detailed cost breakdown.

before they will underwrite the application for construction or a large renovation mortgage.

 

In general, once your full file is submitted to the bank, you will usually get initial feedback within a few days. Depending on the amount requested, some banks have the possibility of approving your request without submitting it to the higher loan committee. However, for higher loan amounts, there are different steps we need to go through and this will prolong the process.

Owning the land

You do do not need to own the land prior to going to the notary to sign the mortgage deed, although many people purchase the land first or have owned it for some time before they apply for the mortgage, especially in the case of a refurbishment finance.

 

You can purchase the land at the same time as signing for the mortgage and the banks can finance up to 50% of the cost (or value if lower) of the land at the notary and following that initial payment, the rest of the mortgage funds are released in stage payments as the build progresses. The typical amount of financing available is around 60-70% of the value of the project, which includes the land. 

Final stage payment

As mentioned above, you can purchase the land at the same time as signing for the mortgage at the notary and following that initial payment, the rest of the mortgage funds are released in stage payments as the build progresses. The number of stage payments is usually agreed between the applicants and the lender. At each point when a new stage payment is due, a specialist valuer will visit the site to assess progress on the build and decide if the next payment can be released by the lender.

Primary residence mortgages in Spain

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.

Investment mortgages in Spain

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.

Commercial mortgages in Spain

If you are buying a property that banks will class as a commercial premises (offices, shops, hotels, B&Bs etc.) 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.

About Mortgage Direct SL

Spain’s biggest Independent broker, offering expert advice on Spanish and Portuguese mortgages to property buyers worldwide.

 

Since 2006, Mortgage Direct have been liaising with banks, estate agents and international property buyers in Spain’s ever-changing mortgage market. 

Why Mortgage Direct?

  • In some cases, due to our long-standing banking contacts, we can ensure fast-track approval of your mortgage application.
  • We have a 98% approval rate and our service comes with a money-back guarantee if the terms offered cannot be achieved.
  • We have adapted our independent service to the needs of property buyers such as you.
  • We continue to negotiate with the banks to provide you with preferential deals both in terms of interest rates and speed of completion.
  • We negotiate the terms and conditions with various banks to bring you exclusive mortgage conditions only available to Mortgage Direct.
  • We have a diverse international team of professionals and advisers with international qualifications, based in Spain to be able to deal directly with the banks.
  • We speak a wide range of languages including Spanish, Portuguese, German, Dutch, English, Polish and Danish

Mortgage Direct in Barcelona

We have arranged many mortgages for clients buying in Barcelona. These cover the full range from people buying for holiday use, as an investment (rental properties), for their permanent residence or for commercial purposes. We’ve assisted clients buying hotels or entire buildings to convert to flats.

 

Once your mortgage is approved, the process remains very local to your new property. We have local representatives who know the areas inside out; we also work with local lawyers and valuation companies (all approved by the Bank of Spain) to ensure our clients receive the very best service all the way through to completion. On completion day, a representative of the local bank branch will sign the mortgage on behalf of the bank and our clients can continue to manage their everyday banking requirements locally thereafter or online.

 

We look forward to assisting you throughout the entire process to help you achieve your goal of becoming a property owner in Barcelona.

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