Spanish Mortgages

Spanish mortgage product guide - what to expect?

There is an excellent range of both capital repayment and interest-only mortgages available to non-Spanish residents who are purchasing holiday homes, investment properties or even their first home in Spain.

Below, we explain how residential mortgage products generally work in Spain. We have created some mortgage packages with our lenders that enable finance that is ‘outside of the norm’.

If you already own property in Spain, such as a holiday home or investment property, and wish to re-mortgage or release equity from this property, please see our Re-mortgage and Cash Raising mortgage page.

 

Tracker rates

The majority of Spanish finance solutions are based on a variable interest rate.

Variable interest rate mortgages in Spain work much like tracker mortgages in the UK. The interest rate will be calculated by adding a fixed margin to the base rate used by the lender. The lender has a choice of base rates that they can use and they are all linked to the European Central Bank’s rate of lending. Most Spanish lenders choose to use the EURIBOR 6 or 12 month index.
Typically, the Euribor 12 month will be more expensive than the Euribor 6 month. This is simply due to the added security brought in when the rate is not reviewed as often.
To see the trends of the EURIBOR rates, please consult our EURIBOR rate page.

Some lenders will offer a fixed interest rate for the first 6-12 months of the mortgage before the above method of calculating the rate is applied. These rates are often used to attract borrowers onto mortgage products that, after this attractive introductory rate phase, will be calculated on high rates of interest as the lender's margin above EURIBOR base rate is high. It is therefore very important to consider the margin and the base rate that will be used after this introductory rate. Your Spanish Mortgage Adviser will ensure that you bear in mind the cost of the mortgage once this introductory period expires.

Long term fixed rate

Fixed interest rate mortgages have typically been offered in Spain on a long term basis. The interest rate would be fixed for the entire term of the mortgage, usually up to 20 or 25 years. This allows borrowers to pay exactly the same mortgage payment to the lender each month and therefore allows for easy budgeting.

As the rate is fixed for the entire term, there will almost always be early repayment penalties applied for any overpayments throughout the whole mortgage term.

Short term fixed-rate

Certain Spanish lenders are also able to offer short term fixed rate deals that follow a similar style to the short term fixed rate deals that are commonly taken in the UK. The lender will normally apply penalties for either partial or full repayment of the mortgage during the fixed rate period and then a reduced penalty for either partial or full repayments made once the rate becomes variable. Please check the exact conditions of each mortgage product with your finance consultant.

Capital repayment or interest-only?

Capital repayment mortgage deals are most common in Spain although interest-only mortgages are now available on holiday home and investment purchases. They are less widely available on first homes where the mortgage product offered tends to be capital repayment. Interest-only products are less prevalent than their capital repayment counterparts in Spain as they were only introduced to the market a few years ago. Some lenders do not have any interest-only products at all. We will steer you towards the lenders that offer interest-only deals if this is your requirement.

Most interest-only products offered by Spanish lenders tend to be split in two phases: the interest-only phase (which can last up to 10-15 years) and the capital repayment phase (for the remaining term). That way, Spanish lenders have the reassurance that the capital will be paid off by the end of the mortgage.

There are a small number of lenders that offer interest-only deals as we know them. If you have decided that you will require an English-style interest-only mortgage for your purchase or re-mortgage, you will need to make sure that one of these specific banks is used.  Interest rates for interest-only packages can often be higher than the rates offered on capital repayment mortgages.

For more information on these products please call us on 0845 400 8000.

How much can I borrow?

Although most lenders will offer 70% LTV to non-Spanish residents, some lenders are able to offer up to 80% of the purchase price. Ask your finance consultant for more details.

What costs are involved?

Legal fees - property related

In Spain, the legal costs and taxes that must be paid by purchasers of property are distinctly higher than the equivalent costs for purchasing property in the UK.
For the purchase of a property in Spain we would recommend that you allow for approximately 12% of the purchase price to cover purchase and mortgage costs.

Legal fees - mortgage related

Mortgage related legal fees include the cost for registering the mortgage taken with the mortgage section of the land registry in Spain - which is obligatory and you must also pay stamp duty on the mortgage amount. The notario or solicitor, who oversees your purchase, will pay this for you and will add it to his bill to you. The charge is based on a percentage of the mortgage amount and will also depend on the type of charge that the lender wishes to secure on your property (again dependent on the age and use of the property).
As in the UK, Spanish lenders charge both an arrangement fee AND a valuation fee. 

Lender’s arrangement fee

The mortgage arrangement fee that is charged by Spanish lenders is typically 1% of the mortgage amount taken.

To speak with a member of the Assetz Finance team, please call 0845 400 8000
or 0161 482 7758

Links

Spanish Mortgage Application Form

Cash-raising and Re-mortgage Products
Spanish Mortgages Guide
Euribor Rates
Why Take a Foreign Mortgage?

Overseas Mortgages

Guide to Investing Abroad

Read our guides to buying and financing foreign property for more insider tips in our members area.

Call Back Request

Can’t find what you are looking for? Or want to chat through your options with an experienced mortgage adviser? Then let us know what time and day is best and we will call you.

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Currency Exchange

As soon as you start looking at property abroad you should open an Assetz Currency Service Account. There is no cost associated with opening an account, and no obligation. It simply ensures that you are ready to act quickly when the need arises, taking advantage of the favourable exchange rates available via the Assetz Currency Service.

Deal of the Day

Look out for Deals of the Day, often unique to Assetz Finance, these deals could save you thousands of pounds. It is important to get the right deal for your circumstances whether for your home, holiday home or investment property mortgage or for your home insurance or life policy. The Deal of the Day could be just that. Speak to one of our Advisers to see which deals are the best for you.

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