Getting a mortgage in Spain: a quick guide
Is it possible to get a mortgage in Spain as a non-resident? Yes, it is! Find out your options, how to arrange one, and how to save money on your future payments.
Whether you’re seeking an investment opportunity, a holiday retreat or somewhere to call home, if you don’t have the luxury of being a cash buyer in Spain, you must secure a mortgage. This can be stressful enough in your country of domicile. Throw in a different language, rules and regulations, and things get even more complicated.
I’m here to reassure you that you can get a mortgage in Spain as a non-resident; the rates are favourable, and the process is simple. So, let’s explore the types of mortgages you can get and how to apply.
Can you get a Spanish mortgage as a non-resident?
You’ll be pleased to hear that you don’t need to be a Spanish citizen or resident to obtain a mortgage to buy a property there. However, the amount you can borrow from a Spanish bank – if that’s the route you choose – is impacted by your residency status.
Purchasing a property in Spain will not alter your residency status. Post-Brexit, Brits can only remain in the Schengen Area for 90 days out of every 180. Therefore, even with your home in the Spanish sun successfully purchased, the amount of time you can spend there will be limited without a visa.
Get prepared
As a non-resident, you must obtain a unique tax identification number called the Número de Identificacion de Extranjeros (NIE). This is the Spanish equivalent of a social security number and is used to identify foreigners coming to Spain to work, study or buy property. Make an appointment via the official NIE website. Waiting times for appointments can extend for up to a month, so arrange this well in advance.
To apply for a Spanish mortgage, you will also need:
· A passport
· Utility bills
· Bank statements (the number of months is dependent on the lender)
· Proof of where the funds originated
· If employed, you will need the last three to six months of payslips
· If self-employed, you will need the last two or three years of tax returns.
· A Spanish bank account to make payments through
Once your NIE number is secured, you can consider which type of mortgage aligns with your needs. A mortgage for a non-resident typically requires a 30% deposit towards the property’s total cost.
Obtaining a mortgage
Two options are available when it comes to obtaining a mortgage to buy a property in Spain, depending on your circumstances:
A Spanish lender
Mortgages are available from Spanish lenders if you conduct your primary business activities there or intend on spending less than 183 calendar days per year in the country. Therefore, if you pay taxes outside Spain, you should be eligible to get a non-resident mortgage. Although, as a foreigner, it may be more difficult to secure a mortgage this way.
Using a Spanish lender has several potential benefits: they will probably have a deeper knowledge of the local laws and market, they might provide access to more mortgage products, and they might be able to offer cheaper interest rates.
Also, consider the value of your payments, which will be made in a foreign currency, exposing their cost to fluctuating exchange rates.
A UK bank
Most high street banks offer international mortgages for Spain. This allows you to obtain a mortgage in your language, eliminating translation challenges and fees. The process should also be expedited, as a UK bank can access your credit history, potentially increasing your chances of securing a mortgage.
Types of mortgages available to non-residents in Spain
Fixed and variable rate mortgages, or even a mix of both, are available for non-residents in Spain.
Fixed-rate mortgage
This favourite with overseas buyers provides the certainty of knowing exactly how much you will pay because the interest rate remains unchanged for the entire borrowing period – this can last up to 25 years for non-residents.
While this type of mortgage can incur higher costs overall, it shields applicants from potential interest rate rises. However, if the rate decreases, you won’t benefit. Moreover, if you decide to exit the arrangement, you will be charged.
Variable rate mortgage
This type of mortgage exposes you to interest rate uncertainty amid European Central Bank monetary policy decisions. Consequently, you run the risk of borrowing costs being raised unexpectedly amid unpredictable macroeconomic factors. Equally, rates could head in the other direction, lowering the cost of payments.
Key characteristics:
· Fixed fee payments for the first year
· Average borrowing term of 15-25 years
· Average interest rate in Spain of around 2.95%.
Note: there are no interest-only or buy-to-let mortgages available in Spain.
Find a mortgage broker
You will need to secure an affordable mortgage before you can make any offers. So, don’t head off on your viewing trip without contacting a mortgage broker first or you might miss out on your perfect property.
Having calculated your budget and ascertained how much you need to borrow, start your search for a Spanish mortgage broker. Be sure to check their professional affiliations and credentials, request references and ensure they understand your requirements.
They will leverage their mortgage network to provide you with access to the best rates and recommend lenders that are familiar with overseas buyers. Additionally, they can help you decide if a fixed-rate or variable rate mortgage would best suit you.
How long will it take to get a mortgage approved?
From researching and comparing mortgage options with your broker to finalising your application, the process of getting a mortgage typically takes six to eight weeks, with a ten-day cooling-off period. In the meantime, you can make offers on properties by arranging an agreement in principle, which only takes a few days.
Save money on your mortgage payments
The value of your monthly mortgage payments, made in a foreign currency, will be exposed to exchange rate fluctuations. These market movements will make the cost of your payments unpredictable if left unaccounted for. If adverse fluctuations prevent the full amount from being paid, it could cause a financial headache.
A currency specialist can help you shield the value of each payment from this market risk and ensure they’re always executed seamlessly by helping you implement a currency strategy.
For example, your personal account manager might help you combine a Regular Payment Plan (RPP) with a forward contract. This proactive approach allows you to automate your payments and fix the current exchange rate for future payments – and the benefits are compelling.
The RPP offers the peace of mind of knowing your mortgage payments will always be executed on time, while the forward contract provides the security of knowing the payments will cover the mortgage each month by insulating them against market movements.