How to obtain a mortgage with a Spanish bank

The Spanish banking system experienced serious reorganization after the country entered the European Union in 1986 and again after its incorporation into the euro zone in 1999. However, the devastating financial crisis that struckSpain in 2007 resulted in an almost complete collapse of the system, which was triggered by the failure of mortgage loans. It became obvious that for the previous 7-8 years, a vast number of Spanish people had been living on credit.

Spain’s robust post-crisis recovery, with a scale and pace otherwise unprecedented for an E.U. country, also impacted the banking system and other financial institutions. Despite the fact that the Spanish credit and financial system still demonstrates numerous drawbacks, every year measures are taken to improve the system (including online banking developments and the simplification of money transfer procedures for certain categories of residents). Thus, it is clear that this sector is developing steadily, and all indications show that further growth is likely.

The following are the most important nuances of the mortgage conditions in Spain for non- residents:

• Mortgages in Spain are granted for 5-30 years, maximum. In practice, the average mortgage period is 25 years. The duration of the mortgage period depends on the seeker’s age and his or her status as a resident or non-resident. For example, if the maximum mortgage period for residents is 30 years, the maximum period for foreigners is 25 years. Such a duration has its advantages: the longer the mortgage period is, the lower the monthly fees are.
• It helps to be informed about the three types of mortgage rates in Spain: fixed, floating, and mixed. Choosing a mortgage with a mixed mortgage rate isusually the best option. However, a fixed-rate mortgage is the most reliable option, even though its rate is higher.
• As a rule, the mortgage for buying a property in Spain is issued at 2.5-3.5% per annum. Therefore, the rates generally are lower in Spain than in other countries. Currently, the possibility to obtain a mortgage in Spain with a UK bank is decreasing. After Brexit, many British financial institutions are in the process of leaving Spain. Barclays, the largest British bank, recently sold out its departments in Spain and Portugal.
• One must pay the mortgage loan on a monthly basis through the entire mortgage period. It is worth mentioning that payable sums may not exceed 30-40% of the income of the mortgage seeker. Early redemption is possible, although a penalty in the amount of about 0.2% of the real estate’s value is charged.
• The best banks for obtaining mortgages in Spain for non-residents are the following: Bankia (at only 1.7% per annum) and Sabadell (with the fastest,top-quality services). However, all of the large, popular banks issue mortgage loans for non-residents in Spain.

Required documents and stages of application for a mortgage in Spain

The confirmation of financial solvency is the major requirement for a mortgage. At the same time, the documents required may vary according tothe specific case and the mortgage conditions of the bank selected. In most cases, in order to apply for property mortgage loan in Spain, the following documents are necessary (along with professional, certified translations into Spanish):

• Confirmation of the reservation of the real estate object; one can attach the sales contract and indicate this fact within the document.
• Income certificate of the person seeking the mortgage, with statements of income for the current and prior year.
• When applying for a mortgage in Spain, non-residents must present a certificate of the flow of funds in a personal banking account for the last year.
• Confirmation of deposits with the Spanish bank.
• Proof of employment with detailed information about the seeker’s position, function, and salary.
• Should a mortgage seeker have a private business and real property in Spain, he or she is required to submit documents that prove the aforementioned information. (In this case, it is important to clarify the list of required papers with a bank representative.)
• Foreigner’s ID number (NIE).
• Original and photocopies of all the pages of a valid international passport.

The procedure for obtaining a mortgage for non-residents in Spaincan be divided into several stages:

• First, one must open a banking account with the Spanish bank chosen for obtaining the mortgage.
• The second stage is the evaluation of the real estate object to determine the potential sum of the mortgage (on average, this procedure takes 5-10 days).
• Next is the collection and submission of all the documents according to the requirements of the specific bank.
• After that, the bank, taking into account the data stated in the presented documents, decides on the sum of the mortgage to be issued for the specific mortgage seeker. The processing time for this stage differs from bank to bank (from 10 days to 1.5 months).
• Further on, in order to obtain a property mortgage in Spain, one must transfer the remainder of the sum to a personal banking account. If this is done in advance, the probability of the bank’s positive decision increases significantly.
• If the bank approves the mortgage, only formalities remain, such as the preparation and signing of notarized documents.