UK residents and expats have traditionally been among the most avid buyers of Spanish property and it continues to draw buyers from the UK seeking a new life or a holiday home.
The property market is in a poor state at present and is suffering from a glut of property, along with its ailing economy. However, the opportunity to pick up property at a discount with sterling having been strong against the euro, has meant that interest remains high.
It is important, however, to ensure that buyers are aware of the costs of entry and exit. The tax situation on Spanish property needs to be studied carefully as the authorities look to reduce the financial deficit, with the latest move to force all expats to list their assets no matter where they are in the world.
Over the past few years the number of illegally built properties on land registered as agricultural has been well documented. It is therefore of the most importance that your client seeks independent legal advice and is able to clarify how the property they intend to buy is currently registered.
There have been problems in the past with properties that have been registered as urban, but the status of the land is still registered as agricultural. In these instances mortgage providers will not finance these type of properties until the status of the land has been changed or updated, which can take a very long time.
Property buyers should also seek confirmation of the correct rate of property tax before committing to buy a property, as these fees do vary depending on the region where the property is located.
Your applicant must register for an NIE number at their local Spanish police station as this is required by all lenders who will insist upon it being produced before a mortgage application is allowed to complete.
For more, see next page
Mortgage finance is generally available across mainland Spain and the Balearic Islands, however please consider that some lenders do not like to lend on properties considered to be rustic.
Alongside issuing mortgage finance some Spanish lenders will require the applicant to open up a bank account with them to make the mortgage payments. It is also not unusual for these same lenders to insist that a life policy along with buildings and contents insurance be taken out as well.
Mortgages for non residents are currently only available in euros, with no pound sterling options available.
A decision in principle service is usually provided by all the mortgage providers in Spain and securing a mortgage offer can typically take between 3 to 4 weeks.
The documents required depends on the individual mortgage provider, however document requirements for Spanish mortgages usually include:
– Copy of passport
– Copy of two utility bills
– Copy birth certificate
– Copy of last 3 months payslips and last years’ P60 or a copy of the last two years accounts and last two years Tax Returns
– Copy of last 3-6 months’ bank statements
– Copy of loan statements for last 12 months
– Evidence of deposit used to buy the property
– Copy of full credit report
– Copy of last years’ mortgage statement on all properties owned
– Copy of tenancy agreements for buy to let properties
– Copy of sales contract
– Copy of the property title deed (Nota Simple)
– Some banks will insist that the applicant visit a local branch before granting an official mortgage offer.
Here are some key facts about the mortgage options currently available for non resident foreigners buying a property in Spain:
Lowest variable rate 3.72%.
Lowest fixed rate 4.6% (two-year fixed)
Smallest loan size considered Some lenders do not set a minimum requirement
Largest loan size considered No maximum barrier applies
Max LTV 70% LTV for all property types considered except those classed as ‘cave houses’
Min time employed 6 months
Min time self employed 1 year
Interest-only options Very limited, but one lender will allow the first two years to be on a interest only basis, max LTV available is 60%
Minimum age 18
Maximum age 75
Min loan term available 5 years
Max loan term available 40 years
