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Lending terms

Foreign citizens applying for a mortgage to purchase property in Spain should not expect financing exceeding 60% of the property value, but no less than €20,000, with a maturity term of up to 25 years. The interest rates are about 4–5% per annum. Borrowers must have redeemed their mortgage before they reach 75 years old. Mortgage payments should not exceed 35% of the borrower's monthly income.

There are two types of interest rates in Spain:

  • variable rate: (tasa variable) it is aligned with the European Central Bank's base rate and can fluctuate. Most mortgages work on a variable rate.

  • fixed rate: (tasa fija) it remains unchanged throughout the payment term. Although initially higher than a variable rate, the borrower does not run the risk of it increasing rapidly in years to come.

Sometimes, banks provide mixed rates (tasa mixta): fixing the rate for the first 5–10 years, then switching to a variable rate afterwards.

Santander, BBVA and Banco Popular Español are Spain's major banks with branches in every large city. However, banks have well-established relations with brokers so it is better to use a big mortgage broker rather than deal with them directly. This increases borrower's chances of success when applying.

Documents

Mortgage applications in Spain require the following documents:

  • passport;
  • pre-sale property contract;
  • income tax return for a year;
  • certificate of no arrears issued by the tax authority:
  • payslips from permanent employment for the previous year;
  • savings account statement for the latest three months;
  • certificate of no arrears (for loans in other countries);
  • statement of account surplus with a bank in the country of permanent residence;
  • NIE (Número de Identidad de Extranjero) — tax identification number assigned to foreign buyer in Spain once they have put down a deposit for the property.

All the documents must be translated into Spanish.

It takes 2–5 weeks for banks to process a mortgage application.

Extra costs

Obtaining a mortgage in Spain will incur the following costs:

  • banks usually perform due diligence and charge a property assessment fee — about €500 (one-off payment);
  • some banks require borrowers to take out life and property insurance plans with them;
  • mortgage application processing — 1–2% of the mortgage amount;
  • stamp duty — 1.8%;
  • prepayment charge — 0.5% for the first five years, then 0.25% for next years.