Spanish mortgages
for US Citizens? IMS guide

Spanish Mortgage brokers

There are two types of brokers of Spain. Its important to understand the difference

The first is not regulated in Spain, and may only introduce an applicant to one specific bank. After that the Bank must take over all communication directly with the applicant. The broker cannot present the application, intervene, or negotiate on behalf of the borrower.

The second type are independent, also qualified, authorised, and licensed by the Bank of Spain. They can and must provide the applicant access to a wide variety of lenders. They are also able to manage the application and negotiate terms and conditions, on behalf of the borrower.

Many lenders in Spain do not have standard products but adapt their offering to each individual client. Based on overall quality of application and risk. Therefore experienced and knowledgeable negotiation ability, is crucial to getting the best result for the borrower.

All IMS clients are provided access to independent mortgage processing in Spain.

Loan to values

Some lenders will offer up to 70% loan to value. This is of the purchase price or valuation, but whichever is the lower of the two. A few lenders may limit loan to values to 60% due to the applicant being outside the EU.

The borrowings cannot include costs of purchase if the loan to value is maximised. Therefore, applicants will need to allow for a 30% deposit, plus a further 12% or so for purchase costs. Purchase costs can vary from region to region. Due to the purchase tax being different. For instance, in Madrid purchase taxes are 6% and in Barcelona 10%.

Mortgage types

All mortgages in Spain are capital and interest. There is no interest only loans. Spanish Banks provide two types of mortgages. Variable trackers, normally tracking the 12-month Euribor and reviewed yearly. Or full-term fixed rates. Margins above Euribor will start at around 1.5%.

Fixed rates can be up to 25 years, although Spanish lenders prefer a maximum 20-year term for non-resident lending. Not all lenders offer fixed rates to US applicants.

Linked products

Spanish Banks may adapt their rate offerings linked to the contracting of linked products. Under regulation of 2019 they must provide one offer with linked products, and one offer without. So the applicant can decide which works best for them.Apart from one lender, all lenders require the borrower has a bank account with them from which the monthly payments will be made. It is also a legal requirement to have buildings insurance, where the Bank is named as the beneficiary.

Financial assessment

Each lender may have some differences in how they calculate affordability. However, in general they are going to look to see that all credit outgoings including the new Spanish payment, do not exceed around 35% of net incomes.This will include all regular credit commitments as identified on credit files. But does not normally include credit card payments.

Spanish Banks cannot access credit files directly. The borrower must provide their credit file as part of the application. This means no search is registered against the applicant. Other commitments like maintenance or school fees may form part of the calculation.

Each lender treats investment properties held by applicant differently. Some will count them as cost neutral if rent exceeds mortgage outgoing. Others may not take account all the rental income, but will assess all the liability.

Investor profile so those who earn a significant amount of their income from property related activity, may find it challenging to raise a loan in Spain.

Document requirements

Each Spanish Bank may have slightly different requirements. None require the documents are translated.In general borrowers will always need to present the following

Employed applicants

• Last 3 months payslips
• Employers reference confirming role, length of service and salary package
• Last 2 years personal tax returns
• Last 6 months personal bank statements showing income being received and liabilities being paid.

Self employed

• Last 2 years company accounts
• Last 2 years personal tax returns
• Last 6 months personal bank statements showing income being received and liabilities being paid.

All applicants will be required to provide a copy of their passports
Before completion the applicant will also need to provide their NIE certificate.

Fees associated with a loan in Spain

Most lenders charge a bank arrangement fee of 1.5% of the loan capital. This is taken on the day of completion.  Valuation fees are payable by the applicant and work out at around 0.10% of the value. Minimum valuation fees are circa € 300.

Valuations have to be instructed once the applicant is financially approved for the formal offer to be issued.

Find more information on Spanish mortgages in IMS website.