How to get a mortgage in Spain.
The essential guide
9 years ago I sat in a restaurant in North Yorkshire on my first date with my now Fiancé. During dinner we discussed our own future plans, wishes and long-term life goals. Surprisingly we both shared one ambition – to live in Spain. Having holidayed there ourselves separately we discovered we both shared a passion for the culture, lifestyle, family orientation, respect, community spirit, social fabric and of course the weather!
After waiting for my Children to get to an age where they would be self sufficient in University or work we set about looking at property in the Costa Del Sol and Almeria areas in 2014.
Looking at property is the easy part. It works differently to the UK here in that all Property Agents share properties and post them for sale. They then split the commission (a fee that is charged to the vendor not the buyer). This explains why you will likely see the photos of the same house on multiple sites. There are many websites listing property such as findmyspanishhome.es, yourviva.com & thinkspain.com. They list all agents properties and when you enquire they go to the agent that listed it on there (which may not be the agent who originally listed the property!)
For us, we wanted to meet the agent that actually visited the house and listed the property initially. After all, they would know most about it, but that was not always possible to establish so we chose one we trusted. We prepared a short list from the UK, gave them a 3-4 day time slot and they arranged the viewings based on our order of preference.
Jumping ahead, we then found our ideal property here in Coin, a nice 4-bed villa on the outskirts of the Town with a pool, stables and lots of land. It needed some work doing to it to modernize it and make it look more rustic so we decided to look at getting a mortgage which would enable us to hold some cash back for renovations or “reforma” as they call it in Spanish.
I searched for mortgages directly with Spanish banks initially. I called a few and was immediately met with a lot of language barriers and also what seemed to be a bureaucratic system of applying. One particular bank said I needed to physically go to the only branch that could handle it ..and that was in Spain – not very good when you live in the UK at the time!
After explaining this to some friends that live in Spain they told me they knew a broker that could help. They told me they had been living in Spain for over 30 years, spoke both languages and had a huge amount of experience and had senior contacts in all the banks to expedite the process. I was straight on the phone! Here I met Larraine De Preter and her Daughter Chloe who I immediately warmed to. They were patient explaining the process to me and what would be required to apply. They told me how they did all the legwork while I could remain working and packing my boxes in the UK! Perfect!!!
As information was requested of me like pay slips, income proof, utility bills etc but that was easy – I simply scanned them in and emailed them. They looked at a few banks for deals and came back with what they thought was the best for us and our circumstances. The offer came pretty quickly (2 weeks) and we signed up with Sabadell, one of the major banks here. Towards the latter stages of the application we had some direct contact with the bank but that was purely to expedite things however this helped as we now have a friend that works in a bank.
People now ask me about interest rates and what to expect. Well as Spain is coming out of recession the rates are still low but overtime will likely increase as history proves. Right now At time of writing this blog I’m told you can get a 5 year fixed at around 2%! Not bad!! There are other deals but the rate decreases if you take other products such as life insurance, house insurance etc from the bank themselves. We found this easier than dealing with more companies and we had a benefit of a reduced interest rate over a long period. A win-win situation.
When you buy a house in Spain you do need to remember that there are legal fees and tax to the Government that need to be paid on completion day. In general these can be around 12-13% of the lowest of the valuation or purchase price (not the mortgage amount!). Whilst that may make you go “gulp” just house purchase budget accordingly. Lets say you have €100k (around £70,000) to put down on a house and want to mortgage the rest. Here are two examples;
1. On a €200k house the fees will add an extra €26k so the true cost is €226k. That €26k of fees cannot be mortgaged so in this scenario you would only have €74k as deposit, not the €100k. Here your €74k deposit would leave you with a mortgage of €126k (around €550 a month). See my next example.
2. You can pick up a very nice 3 bed finca/villa with pool for around €140k, add in the €18k of fees the true cost is €158k. In this scenario your €100k minus the ring-fenced fees money leaves you a deposit of €82k. After deposit this leaves you a mortgage of only €58k. (around €250 a month).
In summary the process is simple;
1. Decide what you can afford, find an area, create a property shortlist.
2. Call DEPIndependent. You need to know what money you have available before visiting and making offers. Money/proof of mortgage is powerful here when negotiating.
3. Revise your shortlist based on the above.
4. Visit the shortlist with your property agent.
5. Find your house, make an offer, have it accepted
6. Complete on the mortgage and purchase.
7. Get packing!
Whether you are moving here to live permanently or buying a holiday home DEPIndependent can help take the pain away. We found them invaluable in researching, shortlisting and recommending a mortgage as well as the actual application process. I think they made several visits to the bank to rush things through and that would have been expensive and difficult for us to achieve whilst still living in the UK. They kept us informed all the way and nothing was too much trouble. We spent as much time as needed on the phone and emails and not once did they bat an eyelid.
What are you waiting for? Spain awaits!!