Getting a Mortgage in Spain
There is plenty of opportunity and risk when buying a property in Spain. NuvoBarcelona helps you to get to grips with the local market and regulations to ensure you don’t fall short of the law when making your property investment in Barcelona. Here are some tips and info to help you on your way during your NuvoBarcelona property investment journey.
Getting a Mortgage as a non resident
Spain encourages foreign investment, so it is possible to get a mortgage as a non resident however products available may have more restrictions than those available for non residents. You may wish to apply for Spanish residency by getting a NIE to ensure you have access to the best options.
Getting a mortgage for a second home is considered to be more risky in Spain, and tend to be offered at higher rates than main residence homes. It is assumed that homeowners suffering financial trouble are considered more likely to default on a second mortgage so you may need a 30-40% deposit if you are buying a second home in Spain. If you are purchasing a primary home where you plan to reside the deposit is around 20%. Either way there are additional taxes of 12-15%.
How Mortgages are structured and assessed in Spain
Criteria used to measure creditworthiness tends to vary between institution. Banks check the combined costs of your lifestyle and any existing loan repayments you have, in order to make sure that any new debt you take on is still manageable. To do this they typically operate an affordability ratio based on your net income after tax, and look to ensure that your debt repayments do not exceed 30-35% of your net earnings. You will have to complete a personal balance sheet to show your existing financial arrangements, and to provide documents to prove your income and outgoings.
Interest rates in Spain tend to come in at 4.16%, most mortgages are issued on a tracker basis following the European Central Bank interest rate, the EURIBOR. Interest rates are offered by banks at 1% over the Euribor rate.
Central interest rates are fairly low in the Euro area so fixed rate mortgages, although available tend not to be a very popular choice for lenders. Nuvo help you to ensure your mortgage options carefully, as it is important to consider an increase in payment due to the the rise of local interest rates. Also, if you are earning and paying your mortgage in GBP fluctuations in currency will also affect your repayments.
The cost incurred when buying a property in Spain also vary to costs in the UK. There is a mortgage deed duty of 1.8%, bank fees which are generally set at around 1%, and all documents are to be signed at a notary office at a cost of 0.5%.
Finally you will pay a valuation fee, a broker fee if you decide to arrange your loan through a broker, and 10% VAT if you buy a new build property. If you are not buying new build, then sales tax of 5-10% of the value (depending on the location and type of house) is payable upon completion. NuvoBarcelona helps to manage the whole financial journey of a property investment, by negotiating the best deals with local banks, keeping you informed of the progress every step of the way.