Mortgage Guidance in Spain

When seeking a mortgage in Spain, international buyers face more challenging entry barriers than domestic clients. Hence, it is crucial for international buyers to seek independent expert advice before presenting an offer.

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Mortgage Guidance in Spain

When seeking a mortgage in Spain, international buyers face more challenging entry barriers than domestic clients. Hence, it is crucial for international buyers to seek independent expert advice before presenting an offer.

Get in touch

How we can help

KNOWLEDGE AND EXPERTISE

This guidance offers valuable insights into the unique challenges and requirements of securing a mortgage as a non-resident, aiding international buyers in navigating the intricate landscape and making informed decisions.

Understanding the benefits of Spanish mortgage is crucial when purchasing a property overseas. This allows you to leverage substantial tax deductions, retain liquidity, and fully utilise the prevailing low-interest rates.

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Mortgage Application

The process of acquiring a mortgage in Spain differs greatly from that of other countries and can be quite intricate. A proficient mortgage broker has the insight into which banks are offering the best deals at any given time and will handle the application process, ensuring that you land the best possible deal.

It’s crucial to entrust a mortgage broker who possesses comprehensive knowledge of the local market, has an impressive track record in the financial industry, and is adept at negotiating with Spanish institutions.

The team at Fortier Finance has a proven history of assisting high net worth individuals securing the most suitable mortgage. They can guide you through the process and help you identify the best mortgage option for your property acquisition in Spain.

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Key Considerations

Source of wealth
Lenders will request information on the source of wealth, and this can be validated by examining a borrower’s curriculum vitae to reinforce their creditworthiness.
Income verification
Each borrower’s income must undergo verification, which should be confirmed by a public or chartered accountant. This process is particularly crucial for business owners and entrepreneurs, as it ensures a comprehensive assessment of global income over a three-year period.
Contractual outgoings
Contractual outgoings must be substantiated with signed documentation to reinforce the feasibility of your mortgage application with lenders. Providing this supporting paperwork ensures transparency and enhances the credibility of your mortgage application.
Origin of funds
The origin of funds must be verified at the beginning of the mortgage application process, and the deposit should be transferred to the notary office for authentication. This upfront confirmation ensures transparency and compliance with regulatory requirements in the mortgage application procedure.
Translation

Translation of paperwork may be necessary for international clients, particularly for foreign investors who do not have documentation in English or Spanish. This ensures clear communication and understanding throughout the mortgage application process, accommodating clients from diverse linguistic backgrounds.

Timing
Timing is crucial as the sale process typically spans 2 to 3 months on a case-by-case basis. Seeking advice sooner rather than later proves advantageous for all involved parties, allowing ample time for comprehensive planning and smoother execution of the real estate transaction.
Mortgage Insurance
Mortgage insurance might become a necessity, so it’s essential to openly and honestly discuss your situation with your advisor to ensure comprehensive guidance tailored to your specific needs. Transparent communication allows for a thorough assessment of whether mortgage insurance is advisable in your particular circumstances.

Expert Mortgage Broker in Spain

Ben showcases strong negotiation skills and an in-depth understanding of the Spanish mortgage market.

He goes above and beyond to grasp borrowers’ requirements and skillfully aligns them with a reliable network of local and international banks.

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MORTGAGE CONSIDERATIONS

Wealth Tax and Inheritance Tax
Mortgages can serve as a strategy to mitigate both the Wealth Tax and the Inheritance Tax, as they are regarded as a debt, effectively decreasing the taxpayer’s net worth. Consequently, securing a mortgage for a property purchase in Spain can yield positive tax implications.
Tax deductions
The interest paid on your mortgage may be eligible for tax deduction, potentially resulting in substantial annual tax savings. However, individual circumstances vary, and it is advisable to verify this with a Spanish tax expert for accurate guidance tailored to your specific situation.
Leveraging
By financing your property, you can preserve your existing funds for other purposes or investments, providing greater financial flexibility.
Time
We have access to an extensive network of domestic lenders, international banks, and private lenders for all financing requests. This allows us to assist you in comparing and selecting from a range of mortgage options that align with your needs and financial situation promptly. By conducting the research and negotiation on your behalf, we save you time and effort in the process.

Closing Costs

When acquiring a property in Spain, buyers should be mindful of various closing costs, which can substantially contribute to the overall expenditure. Typically, we recommend allocating between 10% and 14% of the purchase price to address transaction costs. These percentages encompass the various expenses detailed below.
Notary fees (frais de notaire)
The notary and registration fees are the buyer’s responsibility. These fees typically range between 0.10% and 0.50% of the purchase price. In contrast, for the mortgage, the notary and registration fees are covered by the bank. This means that the customer doesn’t need to worry about these additional expenses when setting up the mortgage. This is all part of our commitment to ensuring a smooth and straightforward process for our clients.
Early repayment
Compensation to the lender is only applicable when the bank incurs a financial loss due to the cancellation. In common practice, mortgages with a variable interest rate, the maximum early repayment fee is 0.25% during the first three years, and 0.15% during the first five years. In most cases, after five years, no early repayment fee applies. For mortgages with a fixed interest rate, the maximum early repayment fee is 2% for the first ten years, and 1.50% thereafter.
Agency fees

In most cases, paid by the seller and usually amount to a fixed percentage, ranging from 3% to 6% of purchase price.

Valuation fee
A survey report or valuation is referred to as a “tasación” and regulated by the Bank of Spain, ensuring they are conducted by professional surveyors. This is done to confirm that the property meets all legal requirements for a mortgage.The cost of the tasación can vary and is dependent on the specific property being assessed. However, you won’t have to navigate this process alone. The Fortier Finance team, for example, can provide assistance by coordinating the valuation process for you. They can help ensure that everything is done correctly and efficiently, making the process of obtaining a mortgage and purchasing a property in Spain as smooth as possible.
Taxes and Stamp duty

The purchase of a new property is subject to VAT, or IVA.

The VAT rate is 10% of the purchase price for residential properties and 21% for commercial properties, plots of land, and garages.

When buying a pre-owned property, the transaction is subject to the Property Transfer Tax, or ITP (Impuesto de Transmisiones Patrimoniales). This tax typically ranges from 6% to 11%, and the exact rate can vary based on the purchase price and the region where the property is located.

The Stamp Duty (Impuesto sobre Actos Jurídicos Documentados) is another tax that applies to property transactions.
This tax is usually between 1% and 1.5% of the purchase price, and the rate can vary depending on the region.

It’s also important to note that while the Stamp Duty does apply to mortgages, it is the responsibility of the banks to pay this tax.

Spanish Property Buyers Guide

01 : Agent

Select a trustworthy agent who has a proven track record in handling international clients.

02 : Mortgage Qualification

Securing a mortgage involves some paperwork, but it will significantly aid your agent and strengthen negotiations with sellers.

03 : Notaire

Acquiring a property in Spain necessitates having a Spanish tax identification number, or NIE. This can be secured either within Spain or via the Spanish embassy in your home country. Given that the issuance of the NIE can take several months, it’s advocated that you apply for it at the earliest opportunity. Typically, the clients’ legal representatives handle the arrangement of the NIE document.

04 : Offer

Non-binding offer is accepted between buyer and seller. If the sale of property is subject to finance, the borrower should be seeking independent advice and fully aware of their obligations.

05 : Sale Agreement

A written contract between buyer and seller which sets out the main terms of agreement. It will distinguish a closing date and any financial contingencies.

After signing the sales agreement, the buyer has a 10-day withdrawal period, allowing them to retract without justification or compensating the seller.

06 : Closing

The formal offer is submitted to the notary in preparation for the final steps of the process. The newer mortgage regulations stipulate that the notary should receive the offer no less than 10 days prior to the completion date. The client is required to meet with the notary at least once before completion to review all mortgage conditions and answer a mortgage questionnaire.

On the day of completion, the mortgage must be in place, and there should be sufficient funds to cover the remainder of the purchase, including any associated costs. The completion is witnessed by a notary, and two deeds are signed: the mortgage deed and the purchase deed.

A representative from the Fortier Finance team will accompany you throughout this process. Our role is to guide you, help you secure the best deal available, and ensure a smooth process from start to finish.