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In recent years, like many countries around the world, mortgage borrowers have benefitted from record lower interest rates that could be fixed. This has stimulated pro-active lending by the Spanish banks to both Spanish residents and non-residents alike.
Over the course of the last few years the lows as previously enjoyed have varied with the Euribor – the mechanism for calculating the applicable mortgage interest rate – initially rising to deal with the vagaries of the lending market to gradually reducing, by the time of writing (late 2025), again making a Spanish mortgage a more competitive when compared to the UK equivalent, for example.
Typically, a British or “EU-member”(excluding Spanish residents) borrower (subject to status) should expect to be able to receive a loan based on 60%-70% loan to value (LTV). That is the properties assessed value (set by a Banco Espana regulated Tasador (property valuers)) but importantly it’s not generally the agreed purchase price.
There is perhaps more emphasis placed by Spanish bank lenders on “affordability” and “serviceability” and less on multiples of income. It is very important that your current income to borrowings ratio in your home market and elsewhere can be demonstrably shown to clear the bar imposed in Spain.
The availability of fixed rates have, given rises in inflation, been less available but our bank sources tell us that they view the non-resident buyers as an attractive lending case and they are keen to assist where they can. There appears to be some flexibility. So it may be anticipated that achieving a fixed rate may well be available albeit for a limited number of years. Giving you borrowing certainty in your budgeting.
The new Market
Seeking a Mortgage loan and providing your financial due diligence to be considered for such an advance is not longer particularly arduous. Many may feel that they are not really equipped to approach a Spanish lender, but in our experience this needn’t be a worry.
There are a couple of lending positions that have evolved over recent years and while I am not advocating the one size fits all approach these may be of interest to the right profiled borrower.For example, those seeking higher value properties where for a variety of reasons, including Wealth and Inheritance tax considerations, you may be best advised to consider the purchase of such a property using a Spanish limited company structure. Historically, lending to companies has been a little cumbersome but some lenders have decided that the key individual(s) behind the company will be able to be assessed for their ability to borrow.
Additionally, if you are the owner of a plot of land and would like to consider developing your plot through building, some lenders have developed a range of funding options that would, we are told, alleviate the need for you to introduce further investment to achieve your development goals.
Some of Spain’s biggest lenders have English speaking customer-facing staff who are increasingly adept at handling Mortgage enquiries from English speaking clients. Indeed some go even further and have dedicated teams with English, Danish, Dutch, Swedish, Norwegian and Polish speaking representatives ready to process your application.
There is a collective incentive to assist clients and levels of efficiency have increased exponentially over recent years. It is now completely normal for bank employees, versed in their systems and the documentation required from a myriad of applicants from around the World, to be able to handle new client Mortgage applications. This will often mean that you will secure a new bank account as part of the process together with household insurances and the like.
It may be interesting to note that some Mortgage lenders offer to reduce the interest rate you pay if , in tandem with your mortgage you also apply for various ancillary products such intruder house alarms, health cover and life insurance. It may often be a condition of the Mortgage lending that you have life assurance cover.
Importantly there should be no cost to you for this service other than the usual Mortgage loan opening fees which tend to be 1%-1.5% of the Mortgage advance. These costs should be included in your application to borrow.
In the due diligence process, in these times of very comprehensive Anti-Money Laundering regulations, anecdotal evidence suggests that you will be required to deliver substantially more documentation to establish the “source of your funds” of the 30% balance of the purchase price plus circa 10% buying costs, that you are introducing from you own resources.
When dealing with a Bank lender, who we’d be more than happy to process for you, they will proactively lead you to deliver in those materials needed to support your application. Many now offer an “agreement in principle” process so that you can identify, early, what are your prospects of obtaining the funding you need.
Having delivered your supporting documentation, including your earnings, debts and current financial commitments, and having established your ability to service a Mortgage loan, the Bank will make you an offer.
As in the UK, the Mortgage offer may be time limited. So, please make sure that if, for any reason, your completion becomes delayed that you address this with your prospective lender in good time to enable them to extend any time limits, as required. You don’t want to have to reapply!
Once you are ready to complete you will be called to the Notary’s Office at least ten (10) working days ahead of your proposed Completion. The Notary will read to you the terms of the draft Mortgage Deed – that your Abogado should have already explained to you in English. This confronts the idea that you simply didn’t understand what you were signing.
The Mortgage Deed, containing all the terms under which the Mortgage is offered, will be signed at Completion of your purchase but this ten day period is, in effect, a “cooling off” period allowing you to decide whether you actually want to go ahead with the borrowing. Following the formal Completion of your purchase, the Mortgage Deed will be registered as a legal charge at your local Land Registry against your property and in your name.
It is vital you consider your intentions for your property early in the purchase process. Will you seek to enjoy sole year round use or will you seek – subject to acquiring from the Town Hall, the applicable Touristic License (known by the initials “VUT”)– to place your property into the rental market? If the latter, I would suggest that you need to carefully check the paperwork with your Abogado, you’ll need to make sure that the terms of your Mortgage Deed allows you to engage in short term/long term rentals. Some Mortgage Deeds have clauses that prevent you from letting your property for more than a given period throughout the year.
The nature of the Mortgage business in Spain is that there are usually many variables. While you may not be too old at 60 to get a mortgage your income does need to support your application. Equally, those in long-term employment contracts may fair better than those with sporadic self-employed income. It doesn’t cost to ask, so please consider an application. We are here and happy to help.
Six reasons why might it be prudent for you to seek a mortgage from a Spanish bank?
Preserve liquidity and leverage purchase
Instead of tying up all your funds in a cash purchase, you may be able to borrow locally and keep other capital free for investment, other properties or projects.
Access to local real-estate banking frameworks
Spanish banks are familiar with the legal, tax and registration system in Spain – so mortgages through them benefit from that local expertise. A foreign bank often may not have that system in place.
Currency and jurisdictional risk mitigation
If a non-resident buyer is using their home currency (e.g., GBP, SEK) it might make sense to borrow in euros from a Spanish bank. This avoids converting large sums into euros upfront or being exposed to exchange-rate risk in servicing the loan.
Competitive interest rates and favourable terms
Spanish lenders usually offer competitive rates and mortgage products (variable, fixed, hybrid) for buyers in Spain.
Potential tax / net-asset advantages
One aspect mentioned is that having a mortgage reduces the “net value” of the property asset in Spain, which can assist in reducing tax burdens like the Wealth Tax (Impuesto sobre el Patrimonio) for high-value property owners in Spain.
Due diligence via the bank’s valuation and property check
The bank will typically insist on a valuation and will check the legal status of the property as part of its mortgage underwriting. This gives an added layer of due diligence for the buyer.
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Please note that our posts are for general interest. There is no substitute for proper advice tailored to your specific circumstances as provided by a qualified Abogado who is experienced in the application of the Spanish Law. Nothing contained in this article should be seen or taken as legal, tax or financial advice and cannot be relied upon as such. Neither the writer nor the publisher accepts any responsibility for liabilities arising as a result of reliance upon the information given. All details have been reasonably fact-checked and all efforts have been taken to ensure that facts are accurate as at the date of publication.
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