How to Get a Mortgage in Spain as a Foreigner

Looking to buy a home in Spain? You’re in the right place! Whether it’s a beachside villa in Costa del Sol or an apartment in the heart of Barcelona, getting there starts with one key step: obtaining a Spanish bank loan secured with a mortgage. 

This guide will give you a clear and straightforward overview of how to secure a loan with a mortgage guarantee in Spain as a foreigner. We’ll walk you through the essential steps, from understanding the eligibility criteria to finalizing the deal. 

Ready to begin your journey to homeownership in Spain? Let’s dive in.

Mortgages in Spain: 2024 Trends

Before you make your big purchase, you’re probably asking yourself whether now is a good time to buy a property in Spain. The short answer is, yes!

Let’s take a look at some interesting real estate trends that potential homeowners should be aware of:

2023 Highlights:

• House prices rose by 7%, with significant hikes in Madrid, Barcelona, and coastal areas, despite fewer sales.
• New mortgages fell by 25%, impacted by current interest rates set by the European Central Bank.
• Rental prices increased by 9%, and long-term rental availability dropped by 12%.

2024 Outlook:

• The Spanish real estate market is expected to stabilize in 2024. Following a period of increased demand and rising prices, the market is expected to cool down, resulting in more stable or even slightly lower house prices in some regions.
• In Spain, EURIBOR rates play a crucial role in determining financing rates. Projections suggest that these rates will decrease in the second half of 2024. This could lead to slightly more affordable financing and a potential easing of property price increases.

Now that you’re up-to-date on the market trends, let’s discuss how you can go about securing that bank loan for yourself. 

How Can We Help You?

Schedule a free consultation below and one of our lawyers will be in touch.

Types Of Mortgage Rates in Spain

Spain offers two primary types of mortgage rates, similar to those found internationally:

Fixed-Rate Loan

The fixed rate locks the interest rate from the beginning, ensuring the payment amount remains unchanged throughout the loan term. It’s an excellent choice for those who value consistency and financial predictability.

Variable Interest Mortgage

With this type, the interest rate can fluctuate based on prevailing market rates, often tied to benchmarks like the EURIBOR. 

While initial rates may be attractively low, making early payments more affordable, there’s a potential risk for significant increases over time. This could affect monthly payments, requiring a careful assessment of future financial flexibility.

Mixed Mortgage

This loan starts with a period where the interest rate doesn’t change. After that, it changes to a period where the interest rate can go up or down until the loan is fully paid off.

How to Choose a Mortgage Rate in Spain

Essentially, the key to choosing between these options depends on your financial stability and risk tolerance. 

A fixed-rate mortgage offers peace of mind with stable payments, while a variable-interest mortgage might start with lower payments but carries the possibility of rising costs. 

Assessing your long-term financial strategy is crucial when selecting the mortgage type that best suits your needs in Spain.

The Annual Percentage Rate (TAE) and Nominal Interest Rate (TIN)

As you dive deeper into the Spanish mortgage market, it’s important to understand the nuances of the Nominal Interest Rate (TIN) and the Annual Percentage Rate (TAE). 

These concepts are crucial for comparing various bank offers effectively. Let’s explore them:

Nominal Interest Rate (TIN)

This rate represents the basic interest charged by the bank on the loan amount. It’s the starting point for understanding your mortgage costs but doesn’t cover the full spectrum of expenses associated with securing a mortgage.

Annual Percentage Rate (TAE)

The TAE is a more comprehensive metric, encompassing not just the TIN but also additional costs tied to the mortgage, including bank fees and various setup charges like notary, appraisal, and opening fees. Essentially, the TAE offers a fuller picture of the yearly cost of your mortgage, making it a valuable tool for comparing the true cost of mortgage offers from different banks.

In essence, while a low TIN might seem appealing, it’s the TAE that provides a clearer indication of the overall cost of a mortgage. This broader perspective ensures you’re not hit with hidden fees and can make a more informed decision. 

Always consider the TAE as your benchmark when evaluating mortgage options to ensure you’re getting the best deal.

Unpacking the Distinctions: TIN vs. TAE in Mortgage Financing

Understanding the differences between the Nominal Interest Rate (TIN) and the Annual Percentage Rate (TAE) is crucial when navigating the complexities of mortgages in Spain. 

Here’s a breakdown of their main contrasts:

Cost Implications

The TAE will always be higher than the TIN, embodying a more accurate measure of your mortgage’s cost. This is because the TAE encompasses all associated banking operation costs, providing a comprehensive overview of the financial commitment involved.

Calculation Methods

The TIN is a straightforward expression of the bank’s applied interest rate on the loan amount. 

To derive the total cost of the mortgage, this figure must be combined with additional expenses, culminating in the TAE percentage. This process ensures a more holistic understanding of your mortgage’s financial impact.

Terms of Expression

While the TIN is articulated as an annual interest rate, the TAE’s flexibility allows it to be represented in various durations, including shorter or even daily terms. 

This adaptability is essential for accurate comparisons across different banking products, emphasizing the need to evaluate offers within the correct timeframes to ensure fairness and clarity.

These distinctions underscore the importance of considering both rates in your mortgage decision-making process. The TIN offers a glimpse into the loan’s basic cost, whereas the TAE provides a fuller, more nuanced picture of the overall financial obligation, ensuring that borrowers can make informed choices based on comprehensive cost analyses.

Key Steps to Get a Mortgage in Spain

The mortgage process can feel like navigating a maze. So, here’s a brief roadmap to help simplify your property purchase journey:

Step 1: Financial Profile Assessment

Your journey begins by submitting your financial documents to the bank. This includes pay slips, employment contracts, investment details, other income sources, credit score, tax returns, and any existing debts. 

The bank will assess these documents to understand your financial health and determine your eligibility.

Step 2: Property Appraisal

Once the bank approves your financial profile, the next step is the appraisal of the property you want to acquire. A mortgage appraisal is a valuation of a property that you can use as a security for a mortgage loan. 

The lending bank uses the appraisal to understand the property’s value securing the loan and the associated risk. The mortgage appraisal serves solely as collateral for the loan and is completely separate from the purchase price.

Step 3: Approval and Binding Offer

Following a positive appraisal, the bank’s risk department approves your economic conditions. You’ll receive a binding offer, including the European Standardised Information Sheet (FEIN) and the Standardised Warning Sheet (FIAE), detailing the mortgage terms.

Step 4: Pre-Signing Transparency Deed

Before executing the mortgage public deed, there’s a mandatory 10-day reflection period (14 days applies for Catalonia). During this time, you’ll meet with a notary to sign a ’Public Deed of Transparency’. These steps are to ensure you understand the loan’s terms, conditions, and what happens if you can’t pay it back. Remember, under Spanish Law, if you owe money, your current and future belongings could be used to pay off the debt.

Step 5: Closing: Execution of the Purchase and Loan Public Deeds 

After the reflection period, you will appear before the Notary Public. Here you will execute both, the purchase and the mortgage loan in public deed. Usually, you get the mortgage loan and buy the property on the same day. This is because the bank can’t give you the loan until you own the property, since the property is what makes the loan secure.

Step 6: Registration

Finally, it’s time to register both the property and the mortgage before the Property Registry. This step is essential as a non-registered mortgage does not offer the same legal protections or priority over the property. The bank will be most interested party in to make sure the mortgage is duly registered.

Special Consideration: Mortgages in Spain for Non-Residents

If you’re not a tax resident in Spain, prepare yourself for a slight shift in conditions. Banks might scrutinize your financial capacity more rigorously, typically offering financing up to 70% of the property’s value and require a higher annual income compared to that of a Spanish tax resident.

This process outlines the general steps towards securing a mortgage in Spain. Remember, each step is a building block towards achieving your dream home. We recommend to consult with an experienced real estate lawyer to ensure there are no unexpected roadblocks on your journey toward property ownership in Spain!

Understanding the Costs of Mortgages in Spain

Securing a mortgage in Spain involves various costs that buyers need to be aware of to manage their finances effectively. Here’s a breakdown of these expenses:

• Property Valuation Fee: A critical first step, this fee covers the cost of appraising the property’s value to determine how much the bank is willing to lend.
• Nota Simple: This document, obtained from the Spanish Property Registry, details the property’s current status and any existing charges against it. It’s essential for confirming the legal standing of your prospective home.
• Bank Mortgage Opening Fee: Banks may charge this fee to cover the administrative costs of setting up your mortgage. While the exact amount varies by lender, some banks may waive this fee entirely.
• Stamp Duty (Impuesto de Actos Jurídicos Documentados): Ranging from 0.5% to 1.5% of the mortgage amount, this tax depends on the property’s location and the loan amount.
• Notary and Registry Fees: These costs are associated with the formal registration of the mortgage. Recent legislative changes have shifted the burden of these fees from the borrower to the bank.
• Insurance: Lenders often require borrowers to take out a home insurance policy as a condition of the mortgage, protecting both parties.

When reviewing your mortgage offer, it’s crucial to consult with a Spanish lawyer or real estate expert. They can help you navigate the terms, assess the financing conditions, and understand the impact of closing costs on your purchasing power. 

Additionally, considering inflation is vital, especially with global trends, to ensure the investment remains attractive over time.

Frequently Asked Questions About How to Get a Mortgage in Spain

Can a foreigner get a mortgage in Spain?

Absolutely! Foreigners are eligible to obtain a mortgage in Spain. Lending institutions in the country provide non-resident mortgages specifically designed for individuals who do not hold Spanish citizenship or residency. 

This opens up the Spanish property market to a global audience, allowing non-residents the opportunity to own a piece of this vibrant country.

How much deposit do you need for a mortgage in Spain?

For acquiring a mortgage in Spain, a minimum deposit of 30% of the property’s purchase price is typically required for non-residents, allowing them to borrow up to 70% of the lower value between the purchase price and the property’s appraisal.

For those planning to reside in Spain, the required deposit decreases to about 20%, offering slightly better conditions.

How much tax will I pay if I buy a property in Spain?

In Spain, the taxes you’ll face when buying property depend on whether you’re purchasing a new build or a resale property.

For a property purchase in Spain, anticipate paying taxes ranging from 8% to 11.5% of the property’s value. This percentage varies based on the type of property you’re buying and its location within the country.

Can I get residency in Spain if I buy a house?

Yes, acquiring a property in Spain can indeed pave the way to residency through the Spanish Golden Visa program. 

When you invest €500,000 or more in real estate, whether it be a residential home, commercial premises, land, or a mix of property types, you become eligible for automatic residency in Spain. 

This program is designed to attract investors by offering them and their families a path to live in this vibrant country.

Can Lexidy Help Me Get a Spanish Mortgage?

Absolutely! The team at Lexidy is eager to guide you through the maze of securing a Spanish mortgage. Partnering with top-tier banks and financial institutions across Spain, we’re here to connect you with the best mortgage conditions tailored to your unique circumstances. 

Ready to leap into Spanish homeownership? Reach out to us today by filling out the form below to take the next step in your property journey.