Mortgages in Spain for Non-Residents

What’s on this page?

1. The essence of mortgage for non-residents
2. Mortgage options for non-residents
3. Requirements and documents
4. Interest rates
5. Repayment and refinancing of a mortgage loan

You really like Spain with its high quality of life, warm mild climate, beautiful nature and delicious food. After several visits to the country in which you rented a vacation home, you can consider moving to Spain for permanent residence.

And to live permanently, of course, is better in your own apartment. About 76% of Spanish residents own their own home. Therefore, the next question will be about buying real estate. You can also buy real estate in case you do not plan to move. You will be able to relax in your apartment or house during your vacation, and for the rest of the period you can rent out housing and receive income. That is, buying your own home promises solid benefits.

The essence of mortgage for non-residents

Assessing the prospects of buying your own home, you first need to think about the budget. It is great if the selected property can be purchased entirely for your own money. But in practice, a large number of people plan on getting a mortgage in Spain.

Mortgage in Spain is a promising area of lending for the purchase of housing, which is possible for both residents and non-residents of the country. The Spanish authorities have created quite favorable conditions for obtaining such a loan for everyone, and intense competition in the mortgage lending market makes real estate in Spain more accessible to different segments of both the local population and foreigners.

Loan issuance for the purchase of real estate is somewhat different for residents and non-residents.

Mortgage options for non-residents

Today, Spanish banks and credit organizations offer non-residents several types of mortgage loans:

• floating-rate mortgage. This type of loan is offered at an interest rate that may vary under certain circumstances. The rate of such a loan, as a rule, is somewhat lower than the fixed one. Such lending is rarely offered to non-residents;
• fixed-rate mortgage. With such a loan, you will pay the same monthly payment throughout the loan repayment period. This type of mortgage is less risky and the interest rates are slightly higher;
• mixed-rate mortgage - the first five years are fixed rate, and then the transition to a floating rate. Now this type of lending is used in rare cases.

In Spain, a mortgage is used not only to buy a home. There are other types of such loans:

• for the purchase of commercial real estate. You are planning to run a business on your own premises and you may be given a loan up to 50% of the value of the property or the value of the business. To obtain such a loan, you will need to provide the credit institution with a business plan, evidence of your successful previous business activities and other documents upon request;
• construction mortgage. If you are planning to build a property for yourself, then you, as a non-resident, can be issued a loan in the amount of 50-70% of the cost of land and construction together. Interest rates for this type of mortgage are slightly higher than for finished property;
• "green" mortgage is a modern type of loan offered for the purchase of new energy-efficient real estate. If your home meets high energy efficiency standards, then you can get a loan at a lower interest rate.

Requirements and documents

If you are wondering how to get a mortgage in Spain, you should know that such loans are offered to customers by banks, including international banks, credit organizations, and savings banks (cajas), and are sold by mortgage brokers.

A mandatory requirement for obtaining a loan is an identification number of a foreigner (Número de Identificación de Extranjero, NIE) and an open account in a Spanish bank. You also need the following package of documents:

• confirmation of your solvency - an employment document with information about income, other documents about your financial situation;
• information about your debt obligations and other loans (if any);
• copies of property ownership documents;
• confirmation of the agreement with the seller of the property under which the mortgage loan is taken (preliminary booking contract);
• property tax document.

It should be noted that the credit institution may require additional documents. If there are no complaints regarding your documents, then you will be offered a mortgage loan on certain conditions that might or might not suit you. In this case, you can be advised to contact other lenders and evaluate their offers. You can also return to the original conditions with offers from other creditors, and it is possible that you will be offered something better. If the offer is accepted, you are ready to sign the mortgage agreement. This takes place in the presence of a notary.

When applying for a mortgage, you will incur some expenses, which include the following:

• commission for registration of a mortgage loan - about 1% of the loan amount;
• stamp duty - AJD tax, the amount of which varies in different regions of the country and is about 1.5% of the loan amount;
• mortgage insurance and payment of insurance premiums - upon receipt of a loan, you are obliged to insure the property purchased with a mortgage;
• if you buy a property that is already under mortgage lending, that is, if you buy a mortgage from the seller, then you will have to pay a commission of about 0.5% of the loan.

There are other mandatory mortgage payments that your lender may pay. These include:

• payment for real estate appraisal;
• notary fee;
• registration fee in the land registry;
• paperwork costs.

It should be remembered that when purchasing real estate, you become a payer of several types of taxes. These include the following:

• income tax from a non-resident IRNR;
• IBI real estate tax;
• IP wealth tax (under certain conditions).

Interest rates

Mortgage rates in Spain, as noted above, are somewhat different for residents and non-residents. So, according to 2022 data, the average mortgage rate in Spain for non-residents was 2.25% for a mortgage with a floating rate and 2.8% for a loan with a fixed rate. A slight increase in the level of rates was affected by rising inflation and some problems in the investment market that arose in connection with the pandemic, high demand in the real estate and mortgage lending markets.

In some cases, at the request of the client, the bank can provide a mortgage loan not in euros. Thus, the client can save on the exchange rate. However, the bank may charge an additional fee to compensate for this difference. In addition, experts recommend reducing currency risks to have their own assets and loans in the single currency.

Repayment and refinancing of a mortgage loan

Mortgage repayment, like any other type of loan, consists of two parts: the principal amount (the "body" of the loan) and interest. When signing a loan agreement, the lender will give you a monthly payment schedule, where all amounts will be displayed.

You may be able to repay the loan early. In this case, you need to first ask the lender about this option-until recently, some banks refused early repayment. But now all creditors agree to such an agreement and charge a certain fee only if they lose income because of this.

If you have paid the amount of the loan in full, then you definitely need to get a notarized act of cancellation of the mortgage from the lender, which you then submit to the land registry and pay all the costs of this process.

If you cannot repay your loan obligations on time, then you need to notify the lender in advance, who can offer you better mortgage terms.

Also, in a certain way, you can improve your credit obligations by refinancing your mortgage: reduce the monthly payment, switch to a different type of interest rate, change the term of the mortgage.

So, after considering all the options, you have decided that you need a mortgage loan. What benefits will it give you? You need to have an amount of 40-50% of the price of the property you have chosen, as you will pay off the rest with a loan. And this makes it possible not to limit yourself to considering only budget housing options. Specialists of the WTG Spain real estate agency, who have extensive experience in this field, will help you choose a property that meets your needs and help you correctly calculate the budget.

Of course, any loan is not without a certain kind of risk, so in order to avoid them, you should study the offers of different lenders and seek advice from specialists. An experienced lawyer who speaks your native language will accompany you through all stages of the property purchase process, including the lending process.

By providing a mortgage, Spain has created favorable conditions for both residents and non-residents for the organization of your purchase of the desired property in this beautiful country.