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Mortgage application process
The process of applying for a mortgage in Spain is very different for a number of reasons.
Firstly the loan is granted on the property and not to the individual, although the individual must demonstrate the ability to repay the mortgage. This means that it is possible to transfer the mortgage to the new owner rather than the necessity to pay it off and for the purchaser to take out a new mortgage.
It is common practice in the UK for a bank to give in writing an agreement in principle for a loan before a property is found thereby establishing an affordable purchase price.
Generally this does not happen in Spain for two reasons, firstly as the loan is on the property they will not agree in writing until the property has been found and a Nota Simple obtained.
Secondly unlike the UK which will lend say 3 times the annual gross income, Spanish lenders will lend normally 30% of your monthly net income, although some banks will go to 40%.
The relevance of this is that the interest rate and the product offered would determine the amount that can be borrowed.
In simple terms an interest only mortgage allows the individual to borrow more than a standard repayment mortgage.
Please feel free to contact us if you would like to know more.
Documentation for an employed person
Last 3 wage slips - Last P60 - Last tax return
Last 6 months bank statements
- Contract of employment
Passport
- NIE
Documentation needed for a self-employed person
Last tax return - Copies of accounts for last 2/3 years
Accountants letter confirming drawings
- 6 months bank statements
IVA returns if Spanish
- Passport
NIE
Timescale
On average the timescale for receiving a formal mortgage offer (oferta vinculado) is 3 weeks, but could be longer depending on the circumstances.
Interest rates
Mortgages in Spain are normally based on the base rate in Europe, this is called Euribor. Some banks may use IRPH, which is the Spanish average mortgage rate or MIBOR, which is the Madrid inter-bank rate.