Is it possible to get a mortgage as a foreigner in Spain?
Housing has always been one of the most important topics for Expats. If you have decided which city you will live in, you might start thinking about buying a new property or home. Sometimes, expats cannot afford to pay the whole amount, and that’s the time when mortgage should be talked about.In this article, we will explain everything you need to know about mortgages.
1. Spain offers many benefits to foreigners that want to ask for a mortgage
You can avoid paying the initial charges: According to thenew mortgage law, the banks are responsible for paying some costs related to the mortgage. The fees such as AJD taxes, registration fees, tax on documented legal acts, and the notary fees will be paid by the bank. This results in a significant reduction in your mortgage.
You will enjoy lower interest rates: Spain is one of the European countries with the lowest interest rate.
You can even pay with your home currency. The exchange rate will be fixed throughout the life of the mortgage payment.
2. Can foreigners get a mortgage in Spain?
The answer is yes! Here we will give you the basic information you need to know before starting the process.
How much can you borrow?
Generally, the banks grant up to a maximum of 60-70% of the property’s value to foreigners.
If you can prove that you have been paying taxes in Spain for more than 2 years, you can get 80% financing.
You might even get 100% financing if you buy a repossessed property from the bank
What is the interest rate?
If you pay by a fixed rate, the rate is usually between 2%-4%
If you pay by a variable rate, the rate is dependent on the Euriborand the profile of the buyer.
How much exactly are you going to pay?
The buying price (we will take this amount as A)
Additional costs you need to pay (although some initial charges will be covered by the bank, you still need to pay some amount), which is about 15% of the buying price (this amount is 15%A)
The bank will grant you 70% of the value of the property. Note that this 70% is usually applied to the value of the price, which is the house price. (this amount is 70%A)
Therefore, we can make a simple calculation: At the time of buying the house, you need to have at least: A+15%A-70%A=45%A. This means that you need to have about 50% of the housing price on hand to be able to buy the property.
For how many years can I pay the mortgage?
Although the mortgage term is usually from 5 to 40 years, it depends on your identity and the bank. If you are a resident of Spain, you generally have 20-30 years to pay the mortgage. If you are a non-resident, then probably you might get a mortgage term of 5-20 years.
3. Some tips to ask for a mortgage
Think twice: Consider all the possible factors that might change your financial situation before asking for a mortgage, such as starting a business, having children, relocation, value growth potential (if you buy it as an investment), etc. These factors might change your decision, or even make you unable to pay off the mortgage in extreme cases.
Be a reliable borrower: The most important factor that the banks look for is your ability to pay back your mortgage. They will look at your income, debts, and securities (if you are an investor). If you show them that you don’t have problems paying off the mortgage, they might grant you better terms and conditions on your mortgage.
Have stable and sufficient income: You should try to have stable and sufficient income before asking for a mortgage. It’s recommended that the monthly mortgage not exceed 35% of your total monthly income.
Less is better: If you ask for a mortgage that only represents 60% of the total property value, it’s more possible to get a better rate.
The early bird catches the worm: Start early and try to compare as many options as possible.
Better together: It’s better if you can apply for the mortgage with your partner.
4. One last note: you are required to contract home insurance!
In general, if you buy a house in Spain, you are not required to buy home insurance. However, if your house will be mortgaged, you are required to contract home insurance by law.However, you don´t need to necessarily contract the home insurance offered by the bank which lends you money. So, you still have the freedom to compare and choose the best option. Here at Adeslas, we offer you complete home insurance which will have you fully covered without any worries.
If you are still in the process of preparing for immigration documents, you can take a look at our expat insurance, a perfect visa insurance that meets all the legal requirements.
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