Differences between the UK and Spain
The Notary System
In Spain, everything in respect of property and loans must be signed by a Notary.
Costs and Interest rates
(allow 12% of the purchase price to cover all costs)
In Spain the entry level costs are much higher than in other European countries these are usually between 3.5 and 4% of the amount borrowed.
Deed Duty: 1.8% of the loan
Bank Fees: a to 1.5% of the loan – payable on completion
Notary Fees: a maximum of 0.5% of the value of the loan
Valuation fee: 0.1% of the value of the property plus any fee you agree to pay your mortgage broker.
Costs deducted from your gross mortgage in advance
- Mortgage tax
- Registry costs
- Purchase deed costs
Loans based on property value – LTV (Loan to Value)
In Spain, any loan for the purchase of property is based on the value of the property not on the selling price, and cannot exceed the price declared on the Title Deeds (Escritura).
Non-resident LTV (Loan to value) loans may not be in excess of 70% of the value of the property. This means that you will 30% of the value of the property for your mortgage application to be successful.
In Spain, Mortgages are linked to a variable rate and the basis of the repayment. The rate is linked the annual Euribor (European inter-bank offered rate) and interest rates are reviewed annually. At the completion of a mortgage, the rate is determined by the Euribor of the month of completion, plus the fixed rate margin as set by your bank.
Off-shore banks: Offshore banks offer sterling loads against a property purchased linked to the Bank of English base rate.
Fixed rates: Many banks in Spain now offer long-term fixed rate mortgages over periods up to 30 years, but be aware that fixed rates are usually higher than the variable rate, although they do offer you some security in times of high inflation.
In Spain, the term of any mortgage can range from 5 to 40 years depending on the age of the applicant and the finance provider, but normally the expectation is that payment will be completed by the age of 70 although there are incidences of 80 years having been accepted.
Underwriting Criteria – Spanish Banks
All liabilities in both Spain and the UK are assessed and are not permitted to exceed 33% of your proven monthly net income. Should you have a rental return from the property this may be taken into account in some cases but it is not the norm.
Mortgage Brokers in Spain
Unless you have a good relationship with a Spanish bank it is wise to engage the services of a top Spanish mortgage broker, as they know the market as well as which banks offer the best mortgage product and the best rates. Although this will mean extra expense in terms of the fees your broker will charge, in the long run, it will take a headache out of the whole process and even save you money.
This document issued by the Spanish Property Registry is a detailed description of the property for sale and includes:
- the current owner’s information
- details of any existing debts against the property
- details of the property boundaries
- the classification of the property i.e. commercial, residential, farmland, developable.
Mortgages for non-residents in Spain
Documents required when applying for a mortgage
- NIE number – This is a tax identification number. As a resident, this will already be among your documents. However, if you are a non-resident, purchasing a property in Spain means you will be liable for Spanish tax.
Non-resident Property Tax: 25% of the calculated initial 2% of the value of the property.
- Verifiable proof of income: Usually payslips covering the last 3 months
- Bank statements covering the past 3 months that show the deposit on monthly income.
- Your last P60 – tax return
- A valid copy of your passport
- A reference for your bank in the UK
- Your Employment contract – if applicable
- Self Employed applicants need to a set of their company accounts
- A copy of your credit status/personal credit report