How to get a mortgage in Spain as an expat
Buying a property in Spain can be a life-changing development and help you to achieve new goals. The main challenges for British expats are understanding how to get a mortgage in Spain, navigating Spanish mortgage rates, and ensuring that all of the documentation is properly completed and submitted.
As part of our commitment to providing mortgage solutions, we’ve put together some key guidance for expats regarding buying properties in Spain in collaboration with our mortgage advisory partner.
Should I take out a mortgage in Spain?
To begin with, we’ll go through some general advantages and disadvantages of buying a Spanish property as a British expat.
- The buying process is actually quite straightforward, although it can be a relatively complex process, even for first-time buyers.
- It’s easy to get to: You can travel between the UK and Spain by plane, ferry or even by car if required.
- Spain encourages foreign investment: The Spanish government is very much interested in people from other countries purchasing its real estate, particularly those who plan to redevelop older properties.
- Excellent value for money: Many Spanish apartments and houses offer outstanding value for money, especially when compared to property prices in the UK. In short, you get a lot more for your money.
- Low cost of living: Many places in Spain offer a much more comfortable way of life without the hefty price tag. Some locations are, of course, more expensive than others, so make sure to do your research and find out how much daily living will cost in different places.
- High rental income opportunities: If you plan to rent out your Spanish property, the entire country is a hugely popular holiday destination with people from around the world. This nonstop demand means that you can charge higher seasonal rental fees than you would in some other countries.
- Locations vary enormously: Whether you’re looking for a property at the heart of a bustling city, in a quiet rural location, right near golden beaches or with a stunning mountain backdrop, Spain offers so much variety in terms of settings and environments.
- You pay tax on all income: In Spain, residents are taxed on worldwide income, which means that your annual Spanish income tax bill will be affected by any income you make in the UK or elsewhere.
- There are additional costs: When buying a property in Spain, there are a few extra fees that apply on top of your mortgage. These are listed further down this guide.
- Sparse job market: If your plan is to move to Spain and seek employment there, it may be a harder and slower process than you think. Spain’s unemployment rate is one of the highest in Europe and over double the EU average. This is definitely worth considering, as it could significantly impact your ability to comfortably fulfil your Spanish mortgage repayments.
Mortgages in Spain for non-residents vs. residents
If you’ve read the above pros and cons and confirmed that you’re still interested in purchasing a Spanish property, the next step is to decide whether you’re planning on taking out a mortgage in Spain as a resident or a non-resident. Both routes are possible, although the process is more complex and time-consuming if you’re a non-resident.
If you’re not yet living in Spain, but are planning on making the move, here are some primary factors to consider:
- Your credit rating, employment contract, salary history, job record and latest tax return will all need to be submitted as part of the mortgage application.
- All of this documentation will need to be officially translated into Spanish before submission.
- Residents in Spain can receive financing between 80% and 100%, whereas non-residents usually only receive around 60%.
- As a non-resident, the maximum mortgage term will be 20 years or less (residents can take out a mortgage for up to 40 years).
- In most cases, only fixed mortgages are available to non-residents.
- The interest rate of your mortgage will be higher than those of residents.
- Non-residents selling a property must pay a 3% tax.
How to get a Spanish mortgage as a resident
If you’re an expat who’s a resident in Spain, there are three main types of Spanish mortgages available to choose from:
- Fixed (most common): The interest rate remains the same throughout the term of the loan.
- Variable: The mortgage’s interest rate will vary in line with the quoted index.
- Mixed: This is a combination of variable and fixed. The interest rate will be fixed for a set time, such as five years, and then automatically convert into a variable rate for the remainder of the term.
Documents required for a mortgage in Spain
There are multiple documents required when an expat applies for a mortgage on a Spanish property. These are needed in order to confirm not only your identity, but also your income, assets and debts.
To apply for a mortgage in Spain, you will require the following documentation:
- A copy of your current passport
- Your NIE number, which is your unique Spanish tax identification number
- Proof of employment or income
- Your latest income tax return
- A purchasing agreement from the seller of the property
- Proof to show that all of the property’s taxes are paid to date
- Proof of your current assets and debts
- Complete information on other loans you currently have
- A copy of the deeds for any existing properties, which can be in the UK, Spain or any other country
Spanish mortgage rates and other costs
It’s crucial that you understand the total cost of getting a Spanish mortgage, which includes knowing the current Spanish mortgage rates. First of all, if your mortgage lender is based in Spain, you can assume that the transaction costs will come to 10-15% of the total purchase amount, so this needs to be factored into your budget.
As with lenders in the UK, Spanish mortgage rates can largely vary, which is why it’s very wise to shop around in order to find the best rate that suits your requirements.
You will also need to ensure that your budget can cover home insurance, plus it’s highly recommended that you take out contents insurance too. Sometimes a Spanish mortgage lender will also require the borrower to take out a life insurance policy that will pay off the outstanding mortgage balance if the situation were to arise.
Other costs to consider are the bank’s arrangement fee and opening fee, the surveyor’s fee, notary and land registration fees, and any legal fees. For tailored advice on how much taking out a Spanish mortgage could cost you, we recommend speaking to an overseas mortgage and finance specialist.
Taxes on Spanish property purchases
We then have to take into account the taxes paid by the buyer, such as:
- Transfer tax: This can be up to 10% of the purchase price, as the rate differs according to where in Spain the property is located.
- Stamp tax: This also varies by location but is generally between 0.5% and 1.5% of the purchase price.
Can I rent out my Spanish property?
Whilst many British expats purchase properties in Spain to live in themselves, others choose to make it an investment that will enable a secondary income. Here are some things to consider if you plan to take out a Spanish mortgage and rent out the property on a long-term basis:
- Rental agreements in Spain can be either verbal or in writing. For peace of mind, a written and signed rental agreement should be stored in a safe place.
- Tenancy contracts usually last 12 months, with the option to renew either annually or every three years.
- Security deposits (typically one or two months’ rent) must be held by a third party, not the landlord.
- If a tenant fails to pay rent by the seventh day of the month, the landlord has the right to commence legal proceedings.
- Rent increases cannot exceed 20% and must follow noticeable improvements to the property.
- The ending of a tenancy agreement by either party must be given at least 30 days’ notice.
- If you decide that you or your family would like to move into the property, you must give the tenant a notice period of at least two months.
How do I get a Spanish mortgage?
The information above will hopefully have helped you to gain a better feel for what getting a mortgage in Spain entails. However, it’s crucial that you seek expert advice before going any further, which is where our trusted partner comes in.
To get started, book your free overseas mortgage evaluation; or alternatively, discover the other destinations we serve.