Applying for a Mortgage in Spain
Being Well Informed is Half the Work!
Considering taking out a loan to finance the purchase of your home in Spain? Spain has a very competitive mortgage market and as a result, there’s plenty to choose from when it comes to loans.
Deciding what type of mortgage suits your circumstances best requires careful examination, considering your short, medium, and long-term plans. It is important you weigh up the pros and cons as the final balance will depend on your personal and financial circumstances as well as your long-term plans. Most Spanish banks allow approximately 50 - 60% loan-to-value (LTV), meaning you will need to budget for at least 40 - 50% yourself.
Naturally, buying a property with a mortgage means you use less of your own money for the purchase and gives you extra leverage when you sell later. Profit margins are particularly good if interest rates are low and property prices are rising. Keep in mind that that a mortgage implicates additional costs.
- Normally the bank stands for the costs
- Based on the amount loaned banks generally charge between 0.5% and 2% of the loan, with the average around 1%. In 2020, the European Court of Justice ruled that the mortgage fee is unnecessary and should not be paid by the buyer, although Spanish jurisdiction has yet to follow suit. Negotiate the fee!
- AJD (Actos Jurídicos Documentados) is a tax charged on the property or mortgage loan set at 1.5% paid by the buyer.
- When buying a property in Spain the notary charges an additional fee for the title deeds. This fee can be negotiated with your bank for them to pay or to split the costs.
- The Land Registry (Registro de la Propiedad) officially records the ownership of the property when purchased. Usually a fee between 0.5% and 1% is charged, depending on the purchase price and whether a mortgage is involved.
- General home insurancy is mandatory in Spain when applying for a mortgage, whereas life and mortgage insurances are not mandatory.
There’s intense competition among mortgage lenders in Spain so before taking a decision, compare terms and conditions with different mortgage lenders to find the most suitable conditions.