Arranging a Mortgage

Arranging a mortgage in Spain may be easier than you think, even if you don’t speak a word of the language and don’t intend to spend much time in the country.

Of course it’s possible to finance your Spanish property purchase with a mortgage secured in the UK or other European countries. And this is the preferred option of many buyers who assume it’s a more hassle-free alternative than dealing with a Spanish lender. In your home country you may be lucky enough to have a friendly local bank manager who is already assured of your credit worthiness and so will offer you a mortgage with a minimum amount of fuss and with all the terms and fine print laid out in a language you can understand.

Until fairly recently most Spanish banks would only grant mortgages to foreigners for a maximum of 15 years and the terms tended to be far less favourable than those offered to Spanish nationals and ex-pat residents. It was also rare to find a Spanish bank offering a foreigner more than 70% of the property value.

But fierce competition among lenders has brought about something of a revolution in Spanish banking in the 21st century. Just a few years ago you might have walked into a branch of a major Spanish bank to be confronted by clouds of cigarette smoke from chain-smoking staff, manual type writers still in use and senior managers with little or no foreign language skills.

How times have changed! Spain’s banking industry has leapt into the 21st century with gusto embracing Internet and telephone banking along with the kind of customer relations skills which were notable by their absence not so long ago. All major banks in the most popular coastal areas now have multi lingual staff specially trained in understanding and meeting the mortgage requirements of foreign buyers. These days the big Spanish lenders are queuing up to throw money at foreign investors and some are even offering 100% mortgages and repayment periods of 25 years.

These factors coupled with relatively low interest rates in Spain and the obvious attractions of avoiding exchange rate fluctuations make a Spanish mortgage a more attractive prospect than ever.

As with any northern European bank, of course Spanish lenders want documentary evidence of income, investments, debts and other liabilities before offering a mortgage. But as long as you’re armed with all the necessary paperwork you should be able to walk in off the street, open a non-residents’ account immediately and have a mortgage agreed in principle soon afterwards.

Many lenders are still reluctant to give non-residents mortgages of more than 70% of the property’s value – and that’s the figure put on it by the bank’s own valuer rather than the market price. But in certain circumstances it’s possible for foreigners to secure mortgages of 80-100% in cases where it’s an off-plan investment or if the bank’s valuation of the property is considerably higher than the purchase price.

It’s well worth shopping around for the best deal, bearing in mind that Spanish business people are more inclined to haggle than their UK counterparts. So don’t just plump for the lender recommended by your estate agent or the mortgage handily bundled together with your off-plan purchase. This may seem the most convenient route but it may not be best way to secure the cheapest and most flexible mortgage.

If you don’t have the time or inclination to check out what’s on offer at several different banks it might be worth your while employing a mortgage broker, specialising in the Spanish property market, to track down the best loan to suit your needs. You only have to explain your exact requirements once and your broker will do the rest of the work. A good broker should be aware of any special deals and promotions being offered by the major lenders, he or she will bridge the language barrier and be able to spot any potential pitfalls in the fine print.

Bear in mind that Spanish lenders charge a mortgage arrangement fee (usually 1% of the mortgage value though it can be as high as 2%) and most impose a financial penalty for early cancellation.

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Investing in the Costa del Sol articles
Investing in Property on the Costa del Sol – an Overview
Past performance of the Costa del Sol property market and outlook for the future

Spanish property investing guides
Guide to buying property to let in Spain
Investment property in Spain – what to buy?
Finding a lawyer in Spain
Arranging a mortgage in Spain
Where to buy Spanish property
Marketing your vacation rental in Spain