Are you looking to apply for an overseas mortgage in Spain? Well, one thing that we can assure you of is that it won’t be easy. It will be a daunting task, especially if it’s your first time, as you won’t know where to start, let alone which piece of information received is correct and which one isn’t. The fact that banks in Spain don’t always offer the same conditions to foreign clients, and all the documentation that will be needed from you makes the application a tricky affair, and without help, you won’t get anywhere. Being of traditional nature as it is, the mortgage market in Spain requires you to have the right connections if you want to get the best deal. Also, you need to prepare early enough, as it will make the process much easier, and thereby give you some peace of mind.
The mortgage products available
Non-resident mortgages (60-70%) – for foreigners whose tax obligations are to another country, and not Spain, the maximum mortgage amount will be 70% of the purchase price. There are banks that will give you a maximum amount of 60%. This is while fiscal residents whose tax obligation is to Spain receive a maximum amount of 80%.
Construction mortgages – if you are looking to build your own home, the bank can offer a construction mortgage. As they are quite complicated, it’s better to speak to a broker to understand more before applying for it. But what we can tell you is that you can potentially borrow up to 70% of the land and the construction costs combined.
Commercial mortgages – are you looking to buy a property in Spain for commercial use? Could be a restaurant, a shop, or even offices. If so, then you should know that the maximum mortgage amount you can get is 50% of the price (or valuation if lower). What’s more, the lenders might ask for business plans, and if possible or where applicable, accounts of any business that were run in the same premises previously, plus what your experiences were, running a similar business. All this information will inform the lender of the chances your business venture will succeed.
What do you need to consider when taking the mortgage
As a foreigner looking to apply for a mortgage for Spanish real estate, there are two things you have to keep in mind. They include:
Property laws – property laws in Spain do differ from those in many other countries, and especially the UK. For instance, back in 2015, there was a law that came into effect, affecting the process of divvying up your property when you die without a will in place. Until then, with regards to the devolution of property in Spain, the law allowed the aspect of a person’s nationality to dictate how the property will be divided, or shared, rather than the individual’s habitual residence. Even before you apply for the mortgage, you really need to consider the property laws that you will be bound to. See if you will be able to comply with the differences. You can talk with your broker about this, to have a better understanding of what you are about to do.
Tax – the amount of tax you will be needed to pay in Spain will largely depend on what you decide to do with the property – renting or using it personally. One thing you should note though is that, as a foreigner, if you have a mortgage, you may find that you are expected to pay income tax even when you decide not to rent out the property. So, you really need to understand the amount of tax that you will be required to pay, otherwise, you will lose a lot of money in terms of missed payments and fees. To ensure that this doesn’t happen, you need to work through the mortgage requirements with your mortgage advisor – you have to find a mortgage advisor who is familiar, or better yet, one who has a proven history of handling Spanish mortgages.
Can you get a Spanish mortgage if have a bad credit history?
Here is the thing, wherever you apply for a mortgage, in any given country, the lender will always check your credit history, to see if you have mismanaged finances in the past and how likely it is that you are to default on your mortgage. Spain is no exception! As we mentioned earlier, getting an overseas mortgage in Spain is a bit tricky, but now, when you add the fact that you’ve had credit problems in the past, it becomes even trickier. Let’s face it, loaning a large amount of money is always a risk to a lender, and so, no lender would ever want to loan money to an individual who might default. The lender wants to be sure and confident that the borrower will afford the payments to keep up with their side of the mortgage agreement. There are lenders in Spain that might make a consideration based on your individual situation. You may find some with super strict rules about what they won’t accept such as bankruptcy, while others lenders will be interested in knowing how long ago the bad credit occurred. This is to tell you even if you are turned down by one lender due to your bad credit history, you can always try the next one. You might find one who will understand and accept your situation.
What happens if one defaults on the Spanish mortgage?
Defaulting on a mortgage in Spain, like everywhere else in the world, might lead to you losing the very same property you were borrowing for. The lender will petition the court to take full control and ownership of the property, which they might sell to recover the defaulted money. Moreover, apart from losing the property in Spain, the Spanish bank might pursue you in your country of residence, whereby every asset you may have in your home country may also be taken away to settle the mortgage.
Find the best mortgage rate
Finally, getting a better deal for your mortgage is also as important as everything else. So, you need to do your research and compare the current mortgage rates offered by different lenders in the country. Let your mortgage advisor help you with this. With their knowledge of the mortgage market, you will be able to find the best mortgage deal, and that means your investment will pull through without any hindrances.