One of the options for financing property in Spain is a Spanish mortgage. However, there are some points that you, as a non-resident, would do well to consider. Therefore, this article discusses three pitfalls of a Spanish mortgage.
Pitfall 1: application processing time
As a non-resident, you are not known to Spanish banks. Often, branches are also not 100% familiar with lending to non-residents. The processing and review of your financial documentation will therefore take longer than usual. The bank may also require a number of translations. Therefore, take into account a processing time of at least a month from first contact with the bank and preliminary approval.
Also, there is a mandatory waiting period of at least 10 days between receiving the draft mortgage deed and signing it. Thus, you will have to appear before the Spanish notary twice. At the first appointment, the notary will explain the terms of the loan. During the second appointment, the actual signing will take place.
Therefore, allow sufficient time between the private sale agreement and the deed of purchase.Find out more about the 4 steps to apply for a Spanish mortgage.
Pitfall 2: the amount to be borrowed
In Spain, you can usually borrow around 60% as a non-resident, depending on the bank you work with and your repayment capacity. However, this percentage is calculated based on the assessed value.
It is common in Spain to effectively have an appraiser come on site. The valuation method is not transparent and depends heavily on the estimator. It is therefore possible that totally irrelevant points may be taken into account.
For example: a couple wishes to purchase a rustic property consisting of three plots: the house itself, a garden with a well and an olive grove. The agreed price is EUR 400,000 for the three plots. One valuer looks at the three plots separately: EUR300,000 for the house, EUR10,000 for the garden and EUR40,000 for the olive grove. The value is then EUR 350,000, of which you can borrow 60%: EUR 210,000. The other appraiser does not take into account the three individual plots and looks at the whole value and arrives at EUR400,000. Then you can borrow EUR240,000. A difference of EUR30,000.
So the appraisal, which can take around 2 weeks, has a concrete impact on the amount to be borrowed. Therefore, take sufficient margin. Ask for a credit for 60%, but to be on the safe side, provide your own contribution of 50%.
Finally, in a sale on plan, you can only borrow a maximum of the balance of the purchase price at deed. Here are some tips for a new build.
Pitfall 3: borrowing with a Belgian or Dutch company
This point is quite simple. Most Spanish banks do not lend to non-Spanish companies because of administrative complexity. People will therefore ask to work with a Spanish company.
Borrowing as a Spanish resident
If you are going to emigrate to Spain or are already living in Spain, the cards are different. Provided there is sufficient verifiable income for the bank, you can usually borrow up to 80% of the appraised value. Also, the turnaround time will often be much faster.
However, there is an exception here. Are you buying the property as part of the operation of a commercial activity? Think of a B&B, a guest house, a shop, etc. Then you should usually have a business plan ready, as well as demonstrable experience in the relevant sector.
Conclusion: pitfalls of a Spanish mortgage
The main pitfalls for non-residents are lead time and credit amount. Provide sufficient equity and allow for sufficient time in the compromise to schedule the sale deed.
Confianz will fully guide you through the purchase of a property in Spain. Buying a house in Spain: what to look out for?