The advantages of mortgages for foreigners in Spain, types of mortgages available and general conditions for obtaining a mortgage loan.
If you are going to buy a home in Spain, you may need financing. According to data published by the Association of Registrars, during 2022 the purchase of homes in Spain by non-resident buyers soared from 60,900 transactions registered in the previous year to 88,858 transactions registered in 2022.
What are mortgages for foreigners in Spain like, though, and what makes mortgages here different from mortgages in other European countries?
Advantages of mortgages for foreigners in Spain
Spain is one of the best countries to buy a property. In addition to the advantages associated with its location (weather, landscape, communications…), Spain offers unbeatable conditions when it comes to taking out a mortgage.
Lower initial costs
Since the entry into force of the New Mortgage Law in Spain in June 2019, taking out a mortgage in Spain has become much cheaper. Before that, the initial costs of a mortgage were almost entirely borne by the buyer. Once the New Mortgage Law was introduced in Spain, the costs associated with taking out a mortgage were distributed as follows:
- Mortgage expenses borne by the buyer: Appraisal and Nota Simple expenses.
- Mortgage expenses borne by the bank: Notary fees, registration at the Land Registry, Agency costs and Stamp Duty.
In order to compete with each other, many financial institutions also assume part of the costs that the Mortgage Law attributes to the buyer, such as the appraisal or the Nota Simple. This situation places mortgages for foreigners in Spain in an even more advantageous position compared to other mortgages contracted in other European countries.
Payment in local currency
Mortgages for foreigners in Spain also offer the possibility of using euros or the customer’s home currency. For example, if you are from the UK, you can apply for your mortgage loan in Spain with pounds or euros, which you will decide when you sign your contract.
Moreover, the exchange rate will be fixed for the duration of the mortgage payments and equivalent to the exchange rate at the time of signing.
Lower mortgage interest rates
Despite the steep increase in interest rates in recent months, Spain has one of the cheapest mortgages in Europe. According to data compiled by the European Mortgage Federation (EMF), the weighted average interest rate in Spain during the third quarter of 2022 stood at 2.02%, which is 1.48% below the average for the 12 European countries analysed by the Federation.
Spain is one of the European countries with the cheapest mortgages, as both the initial contracting costs and the interest rates associated with the loan are among the lowest on the continent.
Types of mortgage in Spain
There are three types of mortgage in Spain:
- Variable mortgage: this has been the favourite of Spaniards for a long time, although according to INE data from March 2023, its contracting percentage has fallen to 36.1% of the total number of mortgages contracted. This is a loan with a changing interest rate, made up of a fixed differential and a variable differential (Euribor).
- Fixed mortgage: the appeal for this type of mortgage has grown in recent times, reaching 63.9% of the total number of mortgages taken out in March 2023. A fixed mortgage is one in which the same interest rate is applied throughout the duration of the loan.
- Mixed mortgage: combines fixed and variable interest rates. Normally, the first years of the loan contemplate a fixed interest rate (about 10 years) and from then on, the interest rate becomes variable.
Although mortgages for foreigners in Spain are exactly the same as mortgages for non-residents, we do find some differences that stem mainly from the basic conditions of the loan.
Conditions for obtaining a mortgage in Spain
When taking out a mortgage in Spain, you will have to take into account the conditions that financial institutions usually offer to non-residents. The conditions for taking out a mortgage in Spain are usually centred on the following:
- Financing between 60% and 70% of the value of the home (similar to residents applying for a second home mortgage).
- Average repayment period of 20 years, with the possibility of extending it up to 30 years on certain occasions.
- Interest rates may be somewhat higher than for the resident population, but will remain lower than in most European countries.
- Possible additional fees, such as the opening fee.
Mortgages for foreigners in Costa Blanca
If you’re looking for a property in Costa Blanca either to invest, as a second home or to live in and you still have doubts about how to buy a property with a mortgage in a country like Spain, you can contact Hispania Homes. Our real estate agency will take care not only of finding a property that matches what you are looking for but also of doing so under the best mortgage conditions.
