Financing a House in Spain: What to Know Before You Buy

Most buyers we meet assume the mortgage will be the hard part. It usually is not. What catches people out is the gap between the price of the house and the amount of cash they actually need on the day.

How much Spanish banks lend

The important number is loan to value, and it depends on your residency.

• Non residents: typically around 60 to 70 percent of the bank's valuation.
• Spanish residents: up to roughly 80 percent.

Note that it is a percentage of the bank's appraisal, not the price you agreed. If the valuation comes in below the purchase price, the shortfall is yours to cover, and that surprise has ended more than one purchase.

Terms usually run 20 to 30 years, with age limits at the end of the term that can shorten the maximum for older borrowers.

The real cash requirement

Put the two numbers together before you start viewing.

As a non resident on a 70 percent mortgage, you need 30 percent as a deposit, plus roughly 10 to 12 percent of the price for taxes and fees. That is somewhere around 40 percent of the purchase price in cash. Work from that figure, not from the deposit alone.

What makes up those costs

• Resale: transfer tax (ITP), broadly 6 to 10 percent depending on the region.
• New build: VAT at 10 percent plus stamp duty of about 1 to 1.5 percent.
• Notary and registry: around 1 to 2 percent.
• Bank and legal fees: roughly 1 percent combined.
• Property insurance: mandatory where there is a mortgage.

Indicative figures. Confirm the current rates for your region and property before budgeting.

The steps, in order

1. Get your NIE.
2. Open a Spanish bank account.
3. Gather income documentation: payslips, tax returns, existing credit commitments, bank statements.
4. Get a decision in principle before you make an offer.
5. The bank instructs its own valuation.
6. Formal offer, then signing at the notary alongside the purchase.

Plan for four to eight weeks from application to approval. Start before you find the property, not after, because a seller will not usually wait two months while you arrange finance.

Fixed or variable

Spanish variable rates are generally tied to Euribor, which means your payment moves with it. Fixed costs a little more at the outset and does not move.

There is no universally right answer. The honest version is that if a rate rise of a couple of points would cause you a genuine problem, take the fixed rate and treat the extra as insurance. If you have headroom and intend to repay early, variable may suit. Ask the bank specifically about early repayment charges, because they differ a lot between products.

Why using a broker often helps

Spanish banks price non resident mortgages quite differently from one another, and the published rate is not always the rate you get. A broker who places these regularly knows which banks are lending to people in your situation this month, which is not something you can tell from a website.

Please read this bit

We manage property, we do not sell mortgages, and none of the above is financial advice. Rates, lending criteria and tax rates change frequently. Use a qualified mortgage broker and a Spanish lawyer, and confirm every figure here against what is actually on offer when you apply.

Once you own it

If the plan is to let the property out and have the rental income contribute to the mortgage, we can tell you what that income realistically looks like across a year before you commit to the repayments. Message us on +34 658 235 481 or info@casacapitals.com.