Mortgages in Spain. Cheaper than in Poland.

How to prepare to apply for a mortgage in Spain?

Mortgages in Spain: basic information and technical terms

A mortgage is one of the most common ways to finance the purchase of a home in Spain, for both residents and non-residents, including Poles. Within the Spanish legal and banking system, there are a number of specific institutions and concepts that you should be aware of before signing a loan agreement.

Types of mortgages

In Spain, non-residents mainly have two types of mortgages available to them:

1. Fixed-rate mortgage – a mortgage loan with a fixed interest rate: the repayment amount remains unchanged throughout the term of the loan, intended for customers who receive their income in euros.

2. Variable-rate mortgage: a loan with a variable interest rate: in most cases, this is based on the Euribor reference rate plus the bank’s margin (spread).

Key concepts relating to mortgages in Spain

• Euribor (Euro Interbank Offered Rate): the main reference rate used for variable-rate mortgages. It is updated every 6 or 12 months.

• APR (Annual Percentage Rate): the actual annual interest rate, which takes into account not only the nominal interest rate but also fees and other costs associated with the loan.

• TIN (Nominal Interest Rate): the nominal interest rate without additional costs.

• LTV (Loan to Value): an indicator showing the ratio between the loan amount and the value of the property. For non-residents, the LTV does not usually exceed 60–70%.

• Valuation: valuation of the property carried out by a valuer accredited and authorised by the Bank of Spain.

• Notary and Land Registry: notary and land registry. The mortgage deed must be signed before a notary and registered with the land registry to be legally valid.

• Mortgage costs: costs associated with taking out the mortgage, such as: notary fees, registration fees, property valuation costs, bank charges, stamp duty (AJD).

Process for obtaining a mortgage loan

1. Submission of the application: the documents required include, amongst others: proof of income, bank statements, certificate of employment, credit report.

2. Creditworthiness assessment: analysis of income, liabilities and credit history.
3. Legal and technical analysis of the property: an important aspect that may halt the process until the documentation is rectified or completed: rectification of the legal status in the Land Registry

4. Binding offer (FEIN – European Standardised Information Sheet): the bank presents the client with the detailed terms of the loan. From the moment this FEIN decision is made until the signing of the LOAN AGREEMENT and the Mortgage Deed, at least 10 days must elapse before the contract is signed.

5. Visit to the solicitor: signing of the public deed of sale and the loan agreement.

6. Registration of the mortgage (registration): entry in the Land Registry.

Own contribution

Banks in Spain usually require non-residents to provide a deposit of between 30% and 40% of the property’s value, as well as to pay all transaction costs.

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Repayment term

The repayment term is the maximum period over which the borrower undertakes to repay the mortgage loan. In Spain, the standard repayment term for a mortgage loan ranges from 5 to 30 years, although in some cases banks even offer loans of up to 40 years, particularly for younger borrowers or as part of government schemes to support the purchase of a first home.

Factors influencing the length of the repayment term:

1. Borrower’s age: most banks require the loan to be fully repaid before the borrower reaches the age of 70–75.

2. Creditworthiness: a longer repayment term means a lower monthly repayment, but a higher total cost of borrowing.

3. Customer profile: banks assess income stability, credit history and the debt-to-income ratio (DTI), which should not usually exceed 35%.

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