How to get a mortgage in Spain
Founder of Mortgage Direct Kevin Monger gives us the lowdown on how to get a mortgage in Spain, the pitfalls to avoid and some of the packages available to Lucas Fox clients.
Spain has a fairly developed mortgage market with numerous lenders offering what can often be a bewildering variety of packages. Lucas Fox’s brokers’ special relationships with leading Spanish and international banks ensure that they are able to negotiate excellent conditions for our clients and are able to obtain the very best mortgage deals from the best mortgage lenders, often unattainable elsewhere. They are also able to guide you through the mortgage set-up process step-by-step. Here we speak to Kevin Monger, the founder of Mortgage Direct, about the process of obtaining a mortgage in Spain and how to get the very best deal along the way.
LF: Why would I need a mortgage broker to obtain a mortgage in Spain?
KM: Our involvement makes a huge difference to the ease and speed of the process and ensures that the best possible conditions are secured for our customers. We do this by working with a network of trusted contacts at each lender, from Branch Managers to Commercial Directors.
LF: Why not use local banks and avoid the broker fees?
KM: Working with us you can be confident we will secure lower rates and higher levels of borrowing and provide a much better service than if you go to banks directly yourself. Banks offer us preferential terms to ensure that we continue sending our clients. Another important factor is that the underwriters know that our clients have a negligible rate of default so they feel more confident approving our cases.
LF: What is the maximum that I can borrow?
KM: As someone who hasn’t been living and paying taxes in Spain the maximum would be up to 70%. If you can demonstrate that you have been living in Spain and paying taxes then you can borrow up to 80%.
LF: How do the banks work out what I can afford?
KM: The banks calculate around one third of your net monthly income and that has to be enough to cover your existing debts including any rent you might pay plus the new Spanish mortgage.
LF: What interest rate can I get?
KM: The exact rate will depend on your profile but you can choose a fixed rate for a term up to 25 years or you can opt for a variable rate based on the annual Euribor.
LF: Will the lender be a Spanish bank?
KM: Usually but not always. We recommend banks offering the best mortgage conditions, which might be a foreign based lender.
LF: What documents do I need to provide?
KM: To provide you with an initial mortgage quote we would need to fully understand your financial profile so you may not need to provide any documents. To then proceed with the formal application process we would need documents to prove your identity, income, taxes paid in the last few years, assets and debts, which will usually include a credit report from a credit reference agency.
LF: What are the costs involved?
KM: Taxes are different from region to region, which significantly affects the overall costs. For example, property tax (stamp duty) is 10% in the Catalonia and Valencia regions whereas in Madrid it is 6%. As a rule of thumb, excluding Madrid, we say to allow for around between 12% and 15% of the property price, depending on the region. For Madrid, we say around 10%.
LF: How long does the process take?
KM: From start to finish you should allow for between six and eight weeks. We have completed mortgages within 4 weeks, although this is not usually required.
LF: Do interest only mortgages exist?
KM: Unfortunately they don’t. Mortgages in Spain are based on repaying the capital with interest from day one meaning that the capital is fully paid off by the end of the term. For construction mortgages it might be possible, but only for one or two years at the start.
LF: Will I have to take out life cover?
KM: No you don’t. Whilst compulsory life cover is a feature of many banks there are some that don’t have this requirement nowadays.
LF: Do I need an NIE number and a lawyer?
KM: All property buyers definitely need an NIE number (Spanish identity number). We strongly recommend that you appoint a lawyer to assist you with the purchase process and they can also apply for the NIE number on your behalf.