What you need to apply for a mortgage in Spain
· 5 min. read
If you are thinking of buying a property in Spain, whether it is a holiday, residential or investment property, you may want to finance part of it. Not all buyers necessarily pay cash for a property, but many choose to take out a mortgage. Even if they have the liquidity to pay cash, some prefer to finance, for a variety of reasons, on the new project.
In this way, they can, for example, pay more comfortably over a certain period of time, while investing the rest of their liquid capital in other attractive financial products. The bank’s interest is covered by the income generated by those other businesses that are proving profitable for them. There are even those who apply for the mortgage because of the tax benefits it entails.
Criteria for getting a mortgage in Spain
Before starting the application process please be aware that, until 2024, these are some of the aspects that any Spanish banking group will take into account.
1.The bank will check stable income and wealth data.
For the bank it is essential that the applicant proves that he/she has a consistent income. Whether it is thanks to a high annual income, employment stability, business stability, wealth or other types of income, as long as it is regular.
2. There must be a proportion between what is requested and what is provided as collateral.
Basically, the banking experts will determine whether there is sufficient income, or liquidity, to pay the agreed amounts every month, taking into account other mandatory fixed costs of the applicant.
For the approval of a mortgage loan in Spain the instalments cannot exceed 30% to 35% of the net monthly income. In addition to income, other assets will be taken into account such as: bank accounts, deposits, securities, insurance, pension funds, investment funds, shares, bonds, art, jewellery and even the possibility of other external guarantors to guarantee the new debt.
3.It is essential to have an unblemished credit history.
Those in charge of granting or not granting the mortgage will check outstanding or unpaid debts with a fine-tooth comb. In Spain, banks can access more than a hundred official registers of various types to check this history. One of the most important is the Central de Información de Riesgos del Banco de España (CIRBE). It consists of a database that collects information on customers’ loans, credits, guarantees and collateral. They will give the bank information on accumulated risk from one thousand euros onwards.
Also to make sure of the customer’s real options they will use the lists of defaulters. Here we find, for example, the National Association of Financial Credit Establishments (ASNEF) or Unpaid Receivables Registry (RAI) among others. At the European Union level, there is also the option of finding situations of insolvency with the registers of each member country. The question is not to have debts, but that they are under control and that the report shows that there is still a greater capacity for indebtedness.
4. Rely on liquidity for a down payment and for taxes.
Banks do not usually finance more than 80% of the value of a property. Therefore, the buyer must contribute 20% of the price of the property in order to have the option to buy. This is what is known in Spain as “putting down a down payment”. To this percentage an additional 12%-15% must be added to cover expenses and taxes (VAT & ITP [Property Transmission Tax]).
VIP mortgages for VIP clients
Once these requirements certifying the payment capacity of the mortgage have been fulfilled, it will be granted at an interest rate to be returned. This surcharge will depend on the conditions of the entity, the Euribor, whether a fixed or variable interest rate is chosen, the amount requested or the repayment time, among other aspects.
In the case of high profile customers, many banks offer special premium mortgages. This is often associated with the fact that the customer has contracted other banking products with the bank.
Documents needed to apply for a mortgage in Spain
Documents for the employee
- TAX ID NUMBER
- Proof of income (last 3 payslips, rents, income, …) and work contract
- Last annual income tax return
- Signed declaration of assets or wealth tax
Documents for a self-employed person
- TAX ID NUMBER
- Proof of income (rents, incomes, …)
- Last annual income tax return
- Signed declaration of assets or wealth tax
Documents for those who have a company
- Corporate income tax for the previous year (if filed).
- Tax returns for the current year (VAT and Corporation Tax).
- Updated balance sheet and profit and loss account.
- Deed of incorporation and other company deeds.
Documents of the property
- Deed of ownership registered in the Land Registry.
- Last receipt of IBI (Property Tax) of the property to be mortgaged.
- If applicable, certificate of being up to date with the payment of the property owners’ association fees.
- Contract of sale of the property or deposit contract.
At Christie’s International Real Estate – Madrid, Malaga and Marbella we always advise and accompany our clients throughout the entire process involved in the purchase and sale of a property, including the application for a mortgage, if the client so requires. As we have trusted banking experts.
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