Taking out a mortgage in Spain is quite possible with the right preparation and guidance. It is wise to seek advice from an experienced agency who takes out mortgages for foreigners on a daily basis with Spanish banks. For example when you do not speak or understand the Spanish language well, when your situation is ‘complex’ as entrepreneur or if you are completely unfamiliar with mortgages in Spain.
Also to avoid surprises and expensive by-products we recommend you to go to a mediator who is experienced and has built a trust bond with the Spanish banks. Generally speaking you can say that there are five important points to be taken into account if you are considering to take out a mortgage in Spain.
The following points are of importance:
1.Maximum 70% finance
Spanish banks can finance up to a maximum of 70% of the purchase price, excluding the costs. 100% finance is not possible in Spain. If the valuation is lower than the purchase price, this lower value will be taken as a base for the 70% mortgage. Please keep in mind that you have to pay 30% plus the cost of the buyer.
2. First arrange financing, then the purchase
It is very advisable to arrange your financing before you sign the reservation contract. If there still is no clarity about the financing and you wish to sign the reservation contract, then ‘ subject to funding’ should be included so you get the time to settle the mortgage. However, in practice, it appears that in Spain a “subject to funding” is almost never included.
3. Book your flight after the mortgage is arranged
Book your flight tickets only after you have security that your mortgage is 100% approved and after the valuation has been done. There are several parties involved in a purchase process, thus it is possible that the bank cannot reach the desired schedule. Patience is a virtue here and in the end everything will turn out well.
4.Rustic or urban residence?
Please check if the property you want to buy is rustic or urban. The Town Hall classifies every property according to rustic or urban features and both have different regulations. This is important to know because many Spanish banks do not finance a rustic property or they give a much lower mortgage. We recommend you to check this beforehand to avoid unnecessary confusion and delay in the purchase procedure.
5.Conservative valuation values
It is obligatory to carry out an appraisal when applying for a mortgage and the values can be conservative. The Spanish banks cooperates with accredited valuators who are registered at the Spanish Central Bank (Banco de España, BDE). These valuators are supervised by the BDE and are the only ones who may carry out valuations for the Spanish banks. Nowadays they are more careful with issuing values and it is very possible that the valuation may be lower than the purchase price even if the purchase price of the house was higher and you think you have negotiated a good price. Don’t be disappointed, in most cases the appraisal value will be close to the purchase price.