As you likely already know, Spanish mortgages tend to be different than acquiring a mortgage in the UK. There are some major differences associated with a Spanish mortgage. One big difference is that Spain has a Notary system. Therefore, everything regarding mortgages and buying property in Marbella must be signed for at the Notary.
Other differences include the interest rates paid and the costs involved. You will also find that mortgage rates are less in mainland Europe, but Spanish mortgages do have a larger entry level cost. This falls between 3.5% to 4% of the amount borrowed. Buying property in Marbella for example, the banks have two types of people they will lend to:
- Nonresidents, being people who don't reside full time and don't pay taxes in Spain.
- Residents, people who live here full time and pay taxes.
At Marbella Homes we work closely with the agents at Mortgage Direct, one of Spain's leading Mortgage brokers. At Mortgage Direct, the agents take the time to explain the whole process of applying for a mortgage on the Costa del Sol. We've put together some of your frequently asked questions about acquiring a mortgage in Spain.
#1 - How long does the mortgage application process take?
Each bank is different in Spain and in some cases will even depend on the time of year. Based on experience, we've seen the whole process take up to 8 weeks to complete.
#2 - How much can I borrow?
Mortgage lenders will look at your ability to pay and usually allow between 30 and 40% of your net monthly income after taxes. Spanish lenders also look at your worldwide debt, which includes other loans you may have, other mortgages, and credit cards. These types of debts are taken into account during the calculation process including any rental payments, alimony payments if any, child support and private school fees.
#3 - How do I repay the Spanish mortgage?
When it comes to a Spanish mortgage, in nearly all cases the mortgage will be a repayment mortgage. This means the monthly repayment is made up of both capital and interest. The mortgage will be paid off in full at the end of the term. Depending on the lender, you may be given the option to pay interest-only during the first one or two years of a construction mortgage, but not for the purchase of an existing property.
#4 - What is the maximum amount I can borrow?
Spanish banks base their mortgage lending on the lower of the valuation or purchase price of the property. Non-residents, those who do not pay Spanish income taxes can borrow 70% of the lower figure. If you can show that you have been paying Spanish income tax, the maximum is 80% of the lower amount. Please keep in mind that these are the maximum amounts, but not every applicant will qualify for these.
#5 - Should I have a lawyer during the buying process?
It is always strongly recommended that you appoint a lawyer to ensure all the necessary checks are carried out on the property. A lawyer is there to protect your interests should anything go wrong during the buying process. We recommend you hire a fully qualified lawyer who is registered with the College of Lawyers (Colegio de Abogados).
#6 - What interest rate will I get on the Spanish mortgage?
The interest rate will be variable and based on the annual Euribor, with an additional percentage (a margin) added to this. For example, if the Euribor is 0.2% and the lender offers Euribor + 1.6%, your rate will be 1.8%. During the variable rate period, your repayments would normally be reviewed annually and increased or decreased depending on the 12 monthly Euribor rate at the time.
The good news about Spanish mortgages
According to the “Instituto nacional de Estadisticas”, the Mortgage statistics of Spain for the month of June, the number of home mortgages registered increased by 16.5% vs last year to 29,516. Each region in Spain including Marbella and the whole of the Costa del Sol have benefited from very strong growth rates, up to 60% for the number of newly issued mortgages. Now is the time to buy property in Marbella.
If you have any questions about Spanish mortgages, please contact Mortgage Direct for a no obligation consultation. If you want more information about the buying process in Spain or to know more about properties for sale Costa del Sol, get in touch with us today – contact Marbella Homes.