In this guest piece, Spanish real estate agent and property expert Sean Woolley shares his experience of getting a mortgage in Spain.
I have recently taken out a mortgage on a property in Benahavís and wanted to share my experience and advice on how to obtain a mortgage quickly and efficiently to make your property dream a reality.
Firstly, it’s a great time to get finance in Spain. The rates are ridiculously low, to the point where the banks really aren’t making any money when you’re looking at how much you’re paying back and the interest rates. Interest rates charged are historically low as they are based on the Euribor and vary depending on the loan.
The Euribor has been negative for the last nine years, so the rates are excellent, typically Euribor plus 1.75 over a 25-year period. We have ended up paying around 2% for the first year and then Euribor plus 1.25 over a 20-year term, as well as having to sign up to the bank’s life insurance and home insurance for the first year.
Recent laws passed in 2019 mean that the banks actually absorb a lot of the setup fees for the mortgage, saving a considerable amount of money. The banks are also now responsible for paying most of the fees involved in the purchase transaction, including what's called the AJD tax on the registering of the mortgage deeds. So that has significantly reduced the cost of actually getting a mortgage here in Spain.
The process of getting a mortgage
For non-resident buyers most lenders will agree to 60%-70% of the purchase price or the valuation, whichever figure is lower. However, you need to prove that you are able to cover the monthly repayments by providing your last 3-6 months bank statements, payslips and a list of existing liabilities (other mortgages, loans etc), plus a credit report. Once they are armed with this information, a decision in principle can be given pretty quickly, normally within a week.
In my case I needed to move quickly to get an offer in place to secure the property, ahead of selling our existing home. I approached a bank which I had done business with for many years, but they said they couldn’t even simulate a mortgage offer until we’d sold and that they were very busy so couldn’t move quickly.
We couldn’t wait, so we approached a few mortgage brokers and ended up using Fluent Finance Abroad to find the right bank who would approve a mortgage within the timescale we needed. They approached three or four banks and had a varied response, some saying no, some saying they needed more time, with only Sabadell coming back quickly with a good offer and being very easy to work with.
The only thing that did surprise me, and makes a difference to how quickly you can move, is that there is a compulsory 14-day cooling off period. Buyers, or their lawyers if they have power of attorney, have to go and sign at the notary at least 14 days before completion saying that you understand the terms of the mortgage, to safeguard the banks. This means there is a delay on completion, even if you’re ready in all other regards.
My advice to anyone who's looking for a mortgage here, is to shop around, even if you have a fantastic relationship with a bank. To make things run as smoothly as possible use a mortgage broker, even though there is a fee. They will know from your case and your finances, who are the banks that are just going to say no, or take too long.
They are particularly valuable if you're self-employed, or have your own business and don't pay yourselves a huge salary. The brokers will package it for you and present it to the banks that aren't going to waste your time and give you a refusal, it really does pay dividends. So I'm glad I did, I'm glad that I paid them their fee and I'm very happy in my new home. I couldn't have done it without them!
That's my mortgage journey in a nutshell. If you want any advice on mortgages, any introductions to the right people, just let me know. There are two or three mortgage brokers out there who we regularly use for clients, and I'd be delighted to make those introductions and see if we can see if we can help along the way.
*Sean Woolley is the founder and director of real estate agency Cloud Nine Spain