How to finance your purchase in Spain. 7 things you need to know.
30.11.-0001Spanish banks and some foreign banking institutions are willing to finance the purchase of a property in Spain. The requirements for obtaining a mortgage are clearly defined. Here we explain the 7 things you need to know before taking out a mortgage.
Maximum amount that can be borrowed for a mortgage loan
The loan amount may not exceed 60-70% of the appraised value of the home. The appraised value is determined by specialized companies that have permission from the Banco de España. (At MedVilla we always point out that, to consider a loan, you must have equity of at least 50% of the price of the desired property. Please note that you will have to pay legal fees and taxes must also be able to pay for the purchase of the house, which are not included in the valuation).
Maximum debt ratio for obtaining a mortgage loan
The debt ratio may not exceed 35% of net income. This means that the installments of the new loan plus those of any other loans the client may have in his country of origin may not exceed 35% of his regular monthly income. (Example: if a married couple earns 5,000 euros net per month, the sum of the new loan fee together with that of other loans they already have may not exceed 1,750 euros)
Duration of the mortgage loan
The age of the youngest of the applicants (in case of more than one), added to the maximum repayment period of the mortgage loan, must not exceed 75 years. The most common mortgages for a second home are usually between 10 and 20 years.
Current interest rate
Mortgage loans are classified into two types depending on their interest rate:
- Variable. The most common mortgage is related to the 12-month EURIBOR, which currently, and depending on the entity, adds an interest rate of 1.45% to 2% and which will move further according to the fluctuations in the EURIBOR.
- Fixed. More and more mortgages are being signed with a fixed interest rate in the region of 4% - 5%. This way you will not be faced with any surprises in the event of interest rate changes.
Commissions and costs when taking out a mortgage loan
The bank normally charges an amount as a set-up fee that varies from 1 to 2% of the loan amount. The customer must also bear the costs of the appraisal. All other expenses and taxes must be paid by the bank since the new law of 2019.
Early Payoff of your Mortgage Loan
Early repayment penalties may not exceed 0.25% during the first years of the loan. For fixed interest loans, this commission increases to 2%. These provisions are applied for full or partial repayment of the mortgage. The additional costs for early repayment are usually negotiable, especially for partial repayment.
Intermediaries for obtaining a mortgage
Some customers prefer the help of a financial advisory firm or professional, others prefer to contact the bank directly. Despite the additional costs, financial intermediaries greatly facilitate the choice of the best loan, they compare the offers of different banking institutions and advise you. At MedVilla Spain we work with Genial Banking that can help you choose the best banking institution.
Important
As a final recommendation, we think it is important that you know your financing options and ability to get a loan in Spain before considering our FREE viewing trip. You'll save yourself time and money, and while you may not be able to get the amount you want, you can always talk to your local bank to consider financing in your country.