Are you thinking about purchasing property in Spain as a non-resident but don't know how? In this article we tell you the process to get a mortgage in Spain!
A mortgage is a guarantee that a lender takes on a property for which it has granted a loan. The mortgage allows the creditor to have the property seized so that a judicial sale can be made to be paid out of the price in case the owner does not pay the sums due.
Mortgages have the particularity that the collateral for the loan is the property itself, which also remains in the hands of the debtor while the debt is being repaid.
- What are the types of mortgage in Spain?
- General conditions for mortgages for foreigners
- Conditions to obtain a mortgage
- Differences between residents and non-residents
What are the types of mortgage in Spain?
In Spain, there are three main types of mortgage: variable, mixed and fixed. Although the financial products are exactly the same for residents and non-residents, some differences may appear. And these differences stem from the basic conditions of the loan.
Variable mortgages apply if the interest rate varies at some point in time. Fixed mortgages apply if the interest rate does not vary throughout the life of the loan. Mixed mortgages apply when the interest rate remains fixed for an initial period of more than 1 year and then becomes variables.
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General conditions for mortgages for foreigners
As a general rule, banks will lend foreigners a significant percentage of the value of the property. If you can prove that you live and pay taxes in Spain for at least 2 years.
The usual interest rate depends on the profile of the person requesting the mortgage and your solvency in the eyes of the bank.
Terms are generally 40 years maximum. As a non-resident, you are more likely to have less time to pay the mortgage. And be advised, in most banks, fixed terms contracts require early termination, meaning it will be difficult to find mortgages that will allow you to repay after your 75th birthday.
Before asking for your mortgage, make sure you have all the required documents for the bank to know your income, assets and debts. You will need to bring a copy of your passport, your NIE which is your identification number, a proof of employment or income, your last tax return, proof that your tax payment have been paid to date, information about any other loans you may have, a copy of your existing title deeds and a credit rating from your home country.
When the bank gives you an offer make sure you have a bank account in Spain.
Then, get other offers from different banks and make sure you pick the offer that is most beneficial to you. You can either compare the offers or contact a broker who will submit the best proposal to you after interviewing his banking partners. Once you have decided which offer to accept, go to the notary to finalise the procedure!
Conditions to obtain a mortgage
Each bank determines its own acceptance conditions, but it is possible to identify the most recurrent criteria. The factors taken into account by credit institutions include a fixed and regular income, a low debt ratio, enough money to live on, age, a personal contribution is always welcome and a healthy financial situation.
In order to obtain a loan, you must have a fixed and regular income as stability is an essential criterion for banks.
A low debt ratio is the ratio between the net income of the household and the total monthly loan payments.
A sufficient residual income is what the household has left each month after deducting fixed expenses and monthly loan payments.
A healthy financial situation as banks do not grant credit to people with a credit history.
Differences between residents and non-residents
Before starting this procedure, you should know there are a few differences between Spanish residents and non-residents when trying to acquire a mortgage, but rest assured the mortgages you will be able to obtain are exactly the same.
However, you should know the interest rate will be higher as a non-resident and you will get less financing for the property.
Non-residents also obtain a shorter repayment term than residents.
Different types of mortgages can be listed according to the interest rate, the type of instalment and the type of property. You will be more likely to receive a fixed-rate mortgage. In any way, banks will take all the necessary measures to avoid any possible risk in repayment.
If you wish to know more about owning property in Spain and living there without residency, click here.
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