Mortgages – UK or Spain?
As a member of the “Euro zone” – the countries which use the Euro as their currency – bank interest rates in Spain are based on the European Central Bank’s base rate (in the UK they are based on the Bank of England’s rates).
Interest rates in the Euro zone are usually lower than in the UK. and this means that more competitive interest rates are available on Spanish mortgages than UK mortgages.
However, Spanish mortgages can have higher fees and more restrictive lending terms than UK mortgages, so are not always the most attractive solution.
If you have a home in the UK, you might find it easier to take a second UK mortgage or to remortgage your existing home and use the additional borrowing to purchase your Spanish home.
If you aren’t sure what will suit you best, seek professional advice from a specialist overseas mortgage broker.
Getting A Mortgage In Spain
Getting a mortgage in Spain is not too difficult, but as with France and some other European countries, non-status (self-certification) mortgages are not available and lending terms are a little more restrictive than in the UK.
To get a mortgage in Spain you will have to provide proof of your identity, as well as your income and any existing liabilities you have, such as mortgages and loans.
Finalising your mortgage may also require some additional information about the property being purchased, and will require you to pay for a survey, conducted by the lender’s valuer, or tasador. This should cost €300 – €500 – roughly the same as a Homebuyer’s Report in the UK.
Here are two basic lists covering the minimum financial information that employed and self-employed people will need to provide. Pensioners fall into roughly the same category
as employed people – it will just be necessary to provide proof of your pension income and financial liabilities.
When applying for a Spanish mortgage, employed people will be required to provide:
- Your NIE (Numero de Identificacion de Extranjeros) – a foreigner’s ID number
Pensioners can qualify by providing proof of their ongoing pension income, but borrowers over 60 are normally only eligible for shorter term mortgages – perhaps 10-15 years.
Self-employed Spanish mortgage applicants will need to produce:
- Your NIE (foreigner’s ID number)
- 3 years audited accounts
- Last 12 months’ business bank statements
- Last 6 months’ personal bank statements
How Much Can I Borrow?
Spanish lenders require that your total mortgage payments amount to no more than 35 per cent of your net monthly income after tax – any other mortgages you already have (e.g. on a UK home) will be included in this 35 per cent.
There are now a few lenders that will allow you to commit up to 40 per cent of your net monthly income.
For non-residents, Spanish lenders will typically lend up to 80% of a property’s value – unless you plan to live in Spain, getting a 100% mortgage will be difficult.
Mortgage lenders in Spain will not take potential rental income into consideration when processing your mortgage application – you must be able to afford a property without receiving the rental income.
• Mortgages – UK or Spain?