Spanish Mortgages Frequently Asked Questions

All your Questions answered - A FAQ section with a difference!

This section exposes any potential pitfalls, addresses misconceptions that have developed in the industry due to false advertising and gives a truthful account of everything we can think of that you need to know.

Assetz Finance does not work exclusively for one lender and can therefore offer completely impartial advice. Our policy, not only includes being impartial, but also focuses on approaching the topic of Overseas Finance honestly.

We do not want you to miss out on the great interest rates offered by overseas lenders and the advantages of overseas finance because you don’t speak the language, are unfamiliar with the process and therefore nervous of taking on the unknown.

Our bilingual and experienced mortgage departments will provide you with all of the advice and assistance you will need to eradicate this feeling of anxiety and enable you to confidently embark on making the most of these advantages.

Our first piece of advice is to read as much honest and frank information as possible on the subject starting now...

1. Can I actually afford a Spanish mortgage?
2. But wouldn’t it be simpler to take a loan with my home bank?
3. How long is it all going to take? Will it slow down my purchase if I have to apply for a mortgage?
4. Wouldn’t I be better off applying to the Spanish bank myself or going to another mortgage broker who do not charge a fee?
5. But couldn’t I find a better deal at a bank that you do not use?
6. What can’t you do for me?
7. Can I use the Assetz Finance Spanish Mortgage Service if I am not purchasing a property through the Assetz group?
8. How exactly does the mortgage process work in Spain?
9. What is the advantage of using a Spanish mortgage to finance my Spanish property?
10. What is the maximum amount I can borrow?
11. What different types of mortgage packages are available to me?
12. How will I pay my mortgage?
13. What costs are involved with a Spanish mortgage?
14. Do I need to travel to Spain or to come to your office to arrange a mortgage?
15. Could we purchase via a Spanish or UK limited company?
16. Do I need to have a survey carried out?

Q1 - Can I actually afford a Spanish mortgage?

We always analyse your current financial situation for you at the very start of the process. We do this before going into too much detail about the types of mortgages available in Spain. We do not advertise "85% LTV mortgages" or "pure interest-only mortgages" or any other mortgage products that are available overseas but only to a very small number of clients due to the harsh lending criteria used for these products. We would only discuss these products with you once we have fully analysed your current financial situation, your intended purchase and therefore ascertained that these products would be realistically available to you.

We will advise you honestly on the amount of mortgage that would be available to you from a Spanish lender, what the true interest rate you are likely to be offered and under what terms given your financial situation and intended purchase.

We will advise you on the affordability criteria used by each bank and advise you which lender you would be best to apply to given the criteria they use and your financial situation.

All of this advice and consultation is free of charge.

Q2 - But wouldn’t it be simpler to take a loan with my home bank?

Quite honestly, perhaps! Your home bank speaks your language and you are used to their procedures. Some investors and purchasers of overseas property do find that this is the best route for them and in some cases it may be their only route if their circumstances do not allow a foreign mortgage. Assetz Finance is here to listen to your requirements and to guide you in the right direction in order to optimise your purchase. Assetz Finance also provides a UK mortgages and loans service and can therefore assist you if you decide that this would be the better route for you. Moreover, we can also provide Spanish mortgages (secured on your Spanish property) in Sterling if you think this may be more suitable for you.

As you will probably be aware, there are a number of Spanish subsidiaries of UK high street lenders now offering Euro mortgages secured on Spanish property. These Spanish subsidiaries run marketing campaigns to the UK general public using their UK branding and reputation. However, they actually use Spanish mortgage rules on affordability and procedures for applications identical to their Spanish counterparts and bear little resemblance to their UK name sake. For this reason it is best to compare the products available through the Spanish subsidiary of your UK high street lender with those available through all the other lenders on the Spanish market. You may find that a very Spanish sounding bank offers a more flexible approach or a better deal for your particular purchase than the Spanish branches of the well known names. It can be time consuming looking through all of the products offered by all of the various lenders in order to establish which is the best for you and so Assetz Finance does this for you.

Once you have established that Spanish finance is the best route for your purchase, Assetz Finance can ensure that you understand the procedures used by Spanish lenders and have all of the bilingual assistance you need. It would be such a shame to miss out on the low interest rates available in Spain.

With Assetz Finance assisting you throughout the whole process, you won’t have to and applying for a Spanish mortgage won’t be as daunting or as difficult as it may seem at first. In fact, we have found that Spanish Mortgages are relatively easy to secure and are not convinced that UK mortgage applications could be deemed as "easier".

We just need a bit of your time, as for example, we need you to complete forms in your handwriting and sign them as we cannot do this for you as they would not then be legal.

We have found that it is only if purchasers of Spanish property attempt to secure such a mortgage without the help of a bilingual expert that it may become more complicated than if they had applied for a UK mortgage.

Q3 - How long is it all going to take? Will it slow down my purchase if I have to apply for a mortgage?

Applying for a Spanish mortgage should never affect the date at which you can sign the title deeds to your property. At Assetz Finance, we are fully aware of the timeframe and deadlines of the purchase process and can liaise with the agent that you are using whether it is Assetz Spain or another agent in order to make sure we keep to these deadlines. As long as you provide all of the supporting documentation and forms to your Finance Consultant initially, you will be able to secure a Spanish mortgage offer in 2 weeks.

Q4 - Wouldn’t I be better off applying to the Spanish bank myself or going to another mortgage broker who do not charge a fee?

Assetz Finance feels that its service speaks for itself and more than justifies the fee charged. The comments that we have received from past clients have confirmed this further - you can see a sample of comments we have received from clients in the box to the right, and more testimonials from satisfied customers are available in our guide to Spanish mortgages (PDF).

If you were to go to the Spanish bank directly you would not be able to benefit from the rapport that we have built up with our lenders that enables us to speed up applications and negotiate any problems. As we have experience in applying for Spanish mortgages, we know exactly how it works, how to put forward the best application to the bank on your behalf and how to guarantee that the bank give you the best offer possible.

You would of course also have to spend the time to contact each individual bank to see what deals they offer rather than have your Finance Consultant take that task off your hands.

Q5 - But couldn’t I find a better deal at a bank that you do not use?

Over the years we have researched the mortgage packages offered by all of the Spanish banks that offer mortgages to non-Spanish residents and the reason we do not work with certain lenders is that we have found that their packages are not best tailored to our clients. We will however research into any lender you would prefer to use to ensure for definite that their package is not better tailored to your needs. We are not tied to any one bank so we can always work with new banks if we do find that they have a good package to offer our clients.

Q6 - What can’t you do for me?

Unfortunately, we cannot of course compile all of the paperwork for you. We do rely on you putting in the work to find all of your important documents.

We also cannot control the mortgage products of the banks or any changes to them. If the lender decides to change their rates or conditions during the time that they are processing your application we cannot stop them from offering you a mortgage that differs from the mortgage we proposed. However, we do put you in touch with your bilingual relationship manager at the bank so that you can discuss the mortgage package that they have offered you in order to establish if it differs from our proposal, and if it still meets your requirements.

We are sure that you will agree that our service is extremely comprehensive and provides you with everything you need. We are however honest and therefore we do not promise you that we can do these above two points when in fact it is impossible for a mortgage broker to do so.

Q7 - Can I use the Assetz Finance Spanish mortgage service if I am not purchasing a property through the Assetz group?

Assetz Finance offers its Spanish Mortgage Service to all clients whether purchasing with the Assetz Group or with any other Estate Agent or Developer.

As long as you provide us with your Agent’s contact details we are able to liaise with them on your behalf.

Q8 - How exactly does the mortgage process work in Spain?

The mortgage process in Spain differs slightly to that in the UK, Ireland, America or Canada but Assetz Finance will guide you through the entire process, so there is no need to worry. Here is an introduction to what you can expect, and how we can simplify the process for you.

In Spain, you can apply for an agreement in principle quite easily from some lenders (but not all) and this can even be done by email. You just have to complete an application form, scan it and email it to your Finance Consultant. From this we can secure you a decision in principle. This can be done prior to reserving a property if desired. Once you have signed preliminary purchase contracts (and usually paid a small deposit) you will need to make a full mortgage application by your chosen lender.

The lender will normally take up to 2 weeks to process this full application. During this time the lender will make his reference enquiries (with your home bank, employer, accountant etc) if any, and carry out any credit checks. Once they receive all references and checks back and have carried out a valuation of your property or floor/site plans, they will be able to send you their offer letter stating full terms and conditions.

Once your application is accepted and your mortgage offer is sent to you, your Finance Consultant will help you understand your offer and guide you on how to accept it.

As well as setting up the mortgage, Assetz Finance can assist you with setting up the obligatory current account with your lender and any insurance policies (life insurance if you wish, plus the obligatory building and contents insurance).

Once your lender receives your accepted offer, and you have opened your current account, you will be ready to proceed with finalising your purchase.

Q9 - What is the advantage of using a Spanish mortgage to finance my Spanish property?

Firstly, lower interest rates than in most English speaking countries!

By using a Spanish mortgage to finance this purchase it leaves you with the possibility of buying something else with the equity or funds available to you in the UK.

If you borrow in your domestic currency, when you come to converting the funds into Euros, the conversion costs involved for the entire purchase of the property may be expensive.

If you want to let out your property for income, you could set the Spanish mortgage interest against the Spanish rental income for tax purposes, which is particularly beneficial for Higher Rate tax payers. The loan interest from any domestic loan or re-mortgage could not be set against your Spanish rental income in the same way.

It may be wise to consider the risks of increasing domestic borrowing as compared to taking out a new mortgage in Spain. By re-mortgaging your main home you may increase the risk of losing it at a time of unforeseen financial difficulty, whereas with a new mortgage on a second home, your main home remains safe.

There are risks involved with all types of borrowing, home and abroad, and you have to opt for what you feel most comfortable with. Assetz Finance is here to help you feel at ease with borrowing in Spain and therefore help you benefit from all the above advantages of a Spanish mortgage if you desire.

However we can also assist purchasers who, despite the advantages of Spanish mortgages, would prefer to raise the finance in the UK.

Q10 - What is the maximum amount I can borrow?

In Spain, lenders calculate how much you can borrow differently to UK, Irish or American lenders, and this can vary greatly from lender to lender. Although some will use income multiples, most of them base affordability on what is called "debt to income ratio". This ratio should not exceed 35, 40, or 45%, depending on the lender and the product required. In plain English, this means that your monthly payments for the prospective Spanish mortgage, plus all of your current monthly financial outgoings should not exceed 35, 40, or 45% of your NET monthly income. By financial outgoings we mean debt servicing, so mortgage/rent, any car loan, bank loan, HP loan, child maintenance payments etc. Others also take into account all expenses such as food bills, electricity bills, holidays, insurance policies…By NET income we mean all employment income, pension income, investment income and rental income (both present and future) after tax. Not all the lenders will normally be able to take future rental income into account for their "debt to income ratio" calculation.

You do not need to worry about calculating your own debt to income ratio, or your maximum budget for your purchase, as your Finance Consultant will do this for you.

Figures given in your application for your NET income must be supported by the applicable documents. For example, self employed borrowers would have to show their last audited company accounts and personal tax return, and salaried borrowers would have to provide their last p60 and /or their last 3 pay slips, depending on the lender.

If you are buying the property with another person, the mortgage application must be made in both names and both purchasers must provide all of the necessary documentation. In terms of the debt to income ratio, the calculations are exactly the same and use joint net income and joint outgoings.

Each borrower’s personal situation varies and the debt to income ratio calculation therefore does not apply to the letter for all purchasers of Spanish property.

For example, if your outgoings are low, but you are currently spending nothing on accommodation, then lenders may allow room for this when calculating your debt to income ratio. An example would be if an applicant had £500/month to spend on a Spanish mortgage according to the criteria above, but was living in their partner’s house which was fully owned and paid for by their partner, and the applicant was not paying any rent. In this case, a Spanish lender may question the security of the arrangement, and allow room in their calculations for any potential living costs the applicant would incur if they were to move out. The amount available for the Spanish mortgage may therefore be reduced to around £200/month, for example.

For high net worth borrowers or borrowers providing a deposit of more than 40%, the debt to income ratio used is slightly more flexible.

Most lenders will offer a maximum of 70% LTV on the valuation price to non-Spanish residents (as long as this does not exceed 100% of the purchase price), although there is an increasing number of 80% LTV mortgage packages available. The loan to value offered to applicants taxed outside the EU may vary.

Maximum loan duration depends on the lender, but is usually 20 - 40 years. However, the loan term should be complete before the borrower’s 65-75th birthday (depending on the lender).

If you plan to raise a loan or re-mortgage a home in order to find the difference between your property price and your Spanish mortgage amount you should let your Finance Consultant know straight away as this is could affect your debt to income ratio.

Please contact Assetz Finance on 0845 400 8000 if you wish a Finance Consultant to calculate your debt to income ratio, budget, likely loan to value and term.

Q11 - What different types of mortgage packages are available to me?

Capital repayment mortgage options are the most commonly offered in Spain although an interest only period of up to 10, or even 15, years at the beginning of the mortgage is available in some circumstances.

The majority of Spanish finance solutions are based on a variable interest rate but fixed rates are beginning to increase in number.

Variable interest rate mortgages in Spain work very much like tracker mortgages in the UK. For the term of the mortgage the interest rate will be a certain percentage higher than the bank’s base rate. Usually the base rate is calculated using the Euribor¹ index. The lender's margin (on top of their base rate) is normally between 0.75% and 1.6%. Some lenders do not use the Euribor, and we will advise you accordingly if this is the case.

¹ EURIBOR stands for the Euro Inter Bank Offered Rate. This is the rate at which European banks can borrow from each other for a set time period - 1, 3, 6 or 12 months. Most Spanish lenders use the Euribor, usually the 12 month base rate, although some others use the 6 or 1 month base rate. The advantage of having a variable rate linked to the EURIBOR is that your bank cannot keep your payments high if general money markets fall in Europe - the bank can only charge their set margin above the current level of the EURIBOR. To check the latest EURIBOR rates, use the link: http://www.finfacts.com/Private/dbn/dbn.htm.

Q12 - How will I pay my mortgage?

Most Spanish mortgages are paid monthly. Each month the lender will withdraw the mortgage payments from the current account that they have opened for you or that we have opened for you with another bank if your lender does not offer current accounts. We can calculate approximate monthly repayment amounts for you for the different mortgage products available to you to give you an idea of your outlay each month.

Q13 - What costs are involved with a Spanish mortgage?

The Assetz Finance Mortgage Service Fee

All of our advice, assistance and simulations are free of charge. However, once you have decided to apply for a mortgage through our service we do charge an up front fee. As we are confident in our ability to secure a Spanish mortgage for you we do not feel that we need to wait before charging you. We have found from past experience that clients have preferred to pay the fee up-front so that it is done.

To our knowledge, there is no other company in the market offering as comprehensive a service as Assetz Finance without charging a fee of some type. This is because the commissions received by brokers from overseas lenders are very minimal and cannot cover all the time and resources required in order to be able to offer the type of high level of service that we do. Our non-charging competitors are subsequently unable to offer the amount of time and assistance that our services involve. In comparison to other overseas mortgage brokers that charge a fee, we have found that Assetz Finance consistently charges less.

We are sure that once you have used the Assetz Finance mortgage service you will agree that this fee is extremely reasonable. In fact, you can read some comments from our past clients in the box to the left, and more comments from satisfied clients are available in our guide to Spanish mortgages (PDF).

The Assetz Finance Mortgage Service fee is £199.

The lender’s fees

Valuation fees

All lenders charge a valuation fee up front. They need to carry out the valuation before they are able to offer you a mortgage.

If you decide not to proceed with your purchase for any reason or if your application is refused, Spanish lenders will normally refund the valuation fees, if the valuation has not already been carried out.

It is very rare for a Spanish lender to refuse an Assetz Finance applicant as we will have checked that you fit Spanish lending criteria and will advise you if you are likely to be unsuccessful in order to avoid you making an application and paying these fees unnecessarily.

Arrangement Fees

Most lenders will also charge an arrangement fee either once you accept their offer or when they release the funds from the mortgage. These fees will normally be withdrawn from your Spanish current account automatically.

The arrangement fee is normally between 1% and 2%. However, Assetz Finance has negotiated with all its lenders to insure that whenever possible you never pay more than 1% of the mortgage amount. Please be wary of any broker that informs you that the mortgage arrangement fee is 2%, as the brokers are often paid by the lenders and this is why brokers sometimes do not negotiate the arrangement fee down like we do at Assetz Finance.

Mortgage related legal fees

There will be mortgage related legal fees (mortgage stamp duty and mortgage registration charge) to pay. This normally costs approximately 1.5% of the mortgage amount.

Other Transaction Costs

There will also be property stamp duty, IVA (equivalent to VAT), and notary and registration costs to be paid (coming to approximately 8% of the purchase price) to the appointed notario in Spain. This notario plays a compulsory role in the purchase of all Spanish property, but does not give any legal advice or assistance with obtaining the NIE number or setting up a power of attorney. For this kind of assistance, which we highly recommend, you will need to appoint your own solicitor. This will come at an additional price. We can recommend UK or local impartial solicitors to you if you require.

Q14 - Do I need to travel to Spain or to come to your office to arrange a mortgage?

No, we can arrange everything for you over the phone or by email as long as you are able to provide all of the necessary paperwork to support your application by post to our office. However, you will need to appoint a solicitor, who will have the Power of Attorney to sign documents on your behalf.

Q15 - Could we purchase via a Spanish or UK company?

If a Spanish company is purchasing the property, the mortgage application must:

• be made in the name of the Spanish company
• include certain documents regarding the company
• give the owners of the company as guarantors and supporting paperwork must be provided by each shareholder of the company.

A UK Limited company can also purchase a property in Spain and apply for a mortgage secured on the Spanish property. The lender will ask for personal guarantees and full application details from each shareholder of the limited company, as well as for the company accounts, and the certification of incorporation. The company will also need to open a Spanish bank account, which we will organise for you.

Q16 - Do I need to have a survey carried out?

The lender will send their own expert to do a valuation (which is why you are charged valuation fees), before deciding on the mortgage amount and offering a mortgage to you. Your solicitor will advise you if it is prudent given your property type to carry out any further surveys or investigations on the property.

If you have a question that is not addressed above, please do not hesitate to contact us directly to speak to one of our experienced Finance Specialists on 0800 400 8000.

And what’s more, calls will be charged at local rate wherever you may be calling from in the UK and will be charged at normal international rates if you are calling from abroad!

One last thing to bear in mind...

Please think carefully before securing any debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or other loan secured on it.

When securing a debt against your foreign property please remember that:

1. your foreign property may be repossessed if you do not keep up repayments on any mortgage or loan secured on it.
2. changes in the exchange rate may increase the sterling equivalent of your debt if taken in another currency.

For all mortgages and loans, irrespective of their location, please be sure that you can afford the repayments before entering into any credit agreement.

The figures and information quoted on this site are believed to be correct at the time of issue and are subject to change without notice. Any quotation supplied is NOT an offer of a mortgage.

In accordance with the Data Protection Act 1998 all personal data handled by Assetz Finance will be processed fairly, lawfully and in the best interests of our client. The information and personal details provided may be disclosed to companies who have an agreed partnership with Assetz Finance and who will be able to offer you financial and property services that you require. These companies may be located in your country of purchase or the UK.

Please be aware that it is a criminal offence to give misleading or incorrect information in connection with a loan application. Specific actions may be taken to prevent fraud.