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Many guides about buying property in Spain assume that potential buyers actually have the money available, but if you are considering buying a house in Spain because you live and work here, or because you simply want to invest in real estate in Spain, you may want to consider taking out a mortgage with a Spanish bank. Whether you want to buy a finca in Spain, a holiday apartment on the Costa Blanca or a new home in Spain, taking out a Spanish mortgage may be the right solution for you.
Interest rates in Spain vary, but are generally much lower than in the UK, and competition between Spanish banks is fierce. If you are interested in a property still to be built, you may find that the constructers already have an agreement with a certain Spanish bank for all mortgages and you are left with little choice. If not, you would be wise to shop around for the best deal.
Don't accept the first offer. Ask for a copy of one bank's offer and then take it to a different bank to see if they can improve the offer - they often will. Then take the improved offer back to the original bank - you may get a pleasant surprise!! It can be worth using services such as Orange Finance, which do exactly that on your behalf.
You will be expected to prove ability to pay (i.e. wage slips from the last 3 months and bank statements of the last 6 months or, if you are self-employed, copies of your last 3 years accounts (with an auditor's stamp) and copies of you last 12 month's business bank statements and your last 6 months personal bank statements). Proof of payment based on your ability to pay with income received from renting the property will not be taken into account by Spanish banks. See our full list documents necessary to apply for a mortgage with a Spanish bank for residents and non-residents.
If you are not a legal resident in this country, then you may be asked to provide an aval. This will be somebody usually based in Spain who agrees to pay in the event of you being unable to. You will also be required to have a NIE (Numero de Identificación para Extranjeros) which is like an ID number everyone needs (residents and non-residents) in order to buy or sell property in Spain.
Most Spanish banks currently offer mortgages of 60-80% property price over 5, 10, 15 or 20 years depending on whether you are a resident here or not. Some banks offer 100%. The current variable rate is about 4.7% and there is usually an early write-off fee of around 1%. See Ranking of Spanish banks and also our section on mortgages for non-residents in Spain.
Liabilities should not exceed 35% of your net monthly income. Banks use the following variables to determine your ability to pay off the mortage:
Existing liabilities (existing loans or mortgages, monthly maintenance agreements..)
Future liabilities including the proposed loan
Present income and investments.