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How a Spanish mortgage works
A Spanish mortgage, hipoteca, is a loan secured on the Spanish property. It is signed before a notary at the same time as the purchase and registered at the land registry. There are variable-rate, fixed-rate and mixed loans, much as at home, but with two important differences:
- The loan is always repaid. Interest-only mortgages do not exist in practice. You pay interest and capital every month until the loan is gone.
- The term is shorter if you are not resident, and it is also limited by your age at the end of the loan. That affects the monthly cost more than the interest rate does.
If you do not live in Spain, no residente terms apply. The bank lends a smaller share of the property’s value than to a resident buyer, which means you need a larger cash contribution — and it must cover both the difference and the purchase costs, which cannot be borrowed.
We give no interest rates or loan-to-value figures here. They differ between banks, change continuously and depend on your income, your existing debt and the property in question. The figures for you come in the bank’s offer — not from a web page. What we can do is help you get offers from several banks to compare.
What the bank looks at
A Spanish bank assesses above all your ability to repay: what share of your net income goes to loans once the new loan is added. Every loan counts — the mortgage at home, car loans, student loans. It also looks at:
- Your form of employment and how long you have had it. A permanent position weighs more than self-employment. The self-employed must show more years of tax returns.
- That your income can be proven with documents the bank can read, that is, translated or in English.
- The value of the property according to a valuation the bank commissions — not according to the price you have agreed.
- Your age, because it limits the term.
The bank will normally also require you to open an account with it, take out home insurance and sometimes life insurance. That is partly negotiable, but not entirely.
The documents you need from home
This is the list that usually takes longest. Start collecting the moment you start looking.
- NIE number for each borrower.
- Passport, valid.
- Payslips for the last few months.
- Employment contract or a letter from your employer.
- Tax returns from your home tax authority for the last few years, with the final assessments.
- Bank statements for the last few months, showing your salary coming in and where the cash contribution is held.
- A summary of your loans at home, with balances and monthly payments.
- A credit report from your home country. Spanish banks cannot see your credit history themselves and want a document.
- If you are self-employed: the company’s annual accounts and your own returns for several years.
Many banks want the documents translated into Spanish, in some cases by a sworn translator. Ask the bank exactly what it requires before you pay for translations you may not need.
The right order — agreement in principle before arras
This section is the most important on the page. The buying process in Spain moves fast, and the deposit contract, arras, comes early. Once you have signed it you are bound: if you withdraw you lose the deposit, even if the reason is that the bank said no.
The order should therefore be this:
- Agreement in principle from the bank before you make an offer. The bank reviews your finances and says how much it is prepared to lend, provided the property is valued as expected. It is not binding, but it answers the question “can I get a loan at all”.
- Reservation of the property.
- Formal loan application on the specific property, and valuation.
- Binding offer from the bank, with all terms in writing.
- Only now: arras.
- Notary — the loan and the purchase are signed the same day.
Arras without financing in place is the most expensive shortcut in a Spanish purchase. Agents often push: “sign now or the property goes to someone else”. If you must sign before the bank has said yes, make sure the contract contains a financing condition that returns your deposit if the loan is refused. Sellers do not always accept it — but then at least you know what you are risking.
The valuation
The bank commissions a valuation, tasación, from an approved valuation company. You pay for it, whether or not the loan goes ahead. The valuation sets the value the bank lends against — not the purchase price. If the property is valued below the agreed price, the loan is smaller than you counted on, and you need the difference in cash.
The valuer also reacts to things that are not in order: extensions that are not in the registry, square metres that differ, unclear use. Another reason to do the checks before you commit.
What the loan costs beyond the interest
- The valuation, which you pay.
- An arrangement fee, if the bank charges one. Negotiable.
- Insurance the bank requires or makes a condition of the rate.
- Costs of the mortgage deed itself at the notary, the registry and stamp duty. Who pays what here is regulated by law in Spain and is largely the bank’s responsibility — but check that the offer says so.
- Translations and any apostilles on your home-country documents.
- Currency exchange. Your income is in your home currency, the loan in euros. The exchange rate affects your real monthly cost over time, and the bank will inform you of that. Take it seriously.
Altogether these are items that belong in the calculation together with the other purchase costs. We work them out for the property in question.
Borrow in Spain or at home?
Both routes are used, and the right choice depends on your situation:
- Borrowing at home — by remortgaging your home — can be simpler: a bank you know, documents in your language, often faster. The downside is that you place the whole risk on your home and buy the Spanish property outright, without security in itself. Banks at home rarely lend against a foreign property.
- Borrowing in Spain gives you a loan in the same currency as the property, secured on the property, and leaves your borrowing at home untouched. The price is more paperwork and stricter terms for non-residents.
Either way: if you own a property in Spain without living here, you file a return for it every year. Read about Modelo 210 — and if you later move here, about tax residency.
Want to know whether a loan is realistic in your situation before you start looking? Send a search brief and we take that as the first step.