Mortgages are availlable up to 80% of the mortgages valuation and this figure is a maximum guideline set by the bank of Spain for non-residents, so normally it will not be possible to borrow more than this in Spain.

Spanish banks can only lend on the basis of a valuation.  Mortgage valuations are carried out as predicribed by law in Spain, and are NOT a market valuation.  Spanish law requires that valuations be set by reference to the recorded transaction values of at least 6 similar properties, wich have been sold in the area in the proceeding 6 months.  Tha value dirives an average price of the property per square meter from these comparisation properties, and is then multiplies up the size of the property to arrive at the mortgage valuation.  This valuation therefore excludes VAT, Property Transfer Tax, Stam Duty and all the other costs of buying the property.

Where a property is bought off-plan, we can lend up to 80% of the mortgage valuation, wich will be done at the end when the property is ready.  If prices continue to rise, this maybe 100% or more of the agreed price.  The mortgage maybe restricted in this example to say, 100% of the agreed p`rice, but not more.  This is because if the mortgage is more then the declared value, the tax-authorities will suspect that the property has been underdeclared, and the transaction could be investigated and the buyer could be penalized.  A simular situation can also arise where part of the price is paid in cash and the full amount is not declared on the title deeds.

If it is a resale property, and especially a rural one, the Spanish legal system for property purchase and mortgage valuations can give rise to a number of variables.  To summarize, they are:

1. Vendors often insists that the price is under-declared on the escritura, and that part of the price is paid unofficially to avaoid tax.  The mortgage cannot exceed the amount being declared.

2. mortgage valuations are based on comparisation values, taken form the Property Register, so only rflect declared values.  On an average these are 20% below the full market price.

3. Mortgage valuations are essentially only "bricks&mortar" valuations - the value of any exceptionally large plots of land is not included.

4. Mortgage valuations are only based on the size of the property recorded in the property Register. very often owners have not declared the full size for tax reasons.

5. We can only lend on properties that registered for residential occupation. 

6. If one of the above problems arrises and the property is in an area zoned for building, getting the registration changed should not be a problem.  But if its a rural area, building is not allowed, so getting the registration changed can be challenging.  to check the registration status you will need a Nota Simple from the registration office.

Especially with rural properties it will often transpire that the maximum mortgage is around 50% of the value.  our status guideline is that yur mortgage and loan repayments, rent and other commitments under court orders (including the new mortgage in Spain), should not exceed 40% of your nett disposable income (after tax)

There is no equivalent in Spain of "buy-to-let" mortgages in the UK.  We cannot take potential future rental income into account.  We may be able to take some of the renatl income into account if the property has allready been rented out and there is prove of the income recieved and tax payed on it ! or if new build the developers are renting other properties on the development and they can give details of the rents being generated.  The amount we will take in to acount is 70% of the nett income.  We add this to your other income and then apply the 40% affordabillity ratio.  This will normally work out as being a "top-up" of between 10 and 20% of the price, in any event your other income allways has to be the main source of incomes.

Self Certification motgages are now availlble to 60% as a standard (no income proof needed) and to 70% where certain limited income documents are required.

We lend you for a maximum term of 40 years up to age 80.

The fees that banks charge you for obtaining the mortgage are a valuation fee of around 0.15% of the property value and an application fee of 1-2%.  in addition, there are other taxes and costs wich you have to pay for registration of the mortgage: Stamp Duty of around 1.8% is charged on a mortgage deed and notary and registration fees of around 1% of the mortgage amount.  <these taxes and fees are in addition to the buying costs of a property.

A mortgage in Spain is a notarial act and so canot be changed.  It is therefore allways advisable to give yourself as much flexibility as ppossible at the start, especially regarding the term.  You can often overpay your account by up to 10% per year in order to repay it sooned than the official term.

If you wish to redeem the loan copletly, most baanks charge a maximum fee of 1% of the amount being repayed.   If you sell the property together with the mortgage, that the buyer then takes over, this fee will not normally be charged.  Banks will also consider waving the fee, if you take out a new mortgage with them.

If the property in Spain is to be your main home, in order to grant a mortgage you must have a guaranteed income.  if your earned income will continue wherever you residide originally, or you have a pension, there is no problem.  If you will be employed in Spain, we will need to see your new contract, 3 months payslips and tax receipts.  If you are setting up a new buisness, or buying an existing one, we would need to see a three years account before we grant any mortgages. 

If the property is a new one, we connot grant the mortgage untill the property has been completed and registered.  Untill then it does not exists for Spanish law, so you could not buy it, and cannot be mortgaged.   The contract you sign at the start is not a purchase contract, but a contract that you commit to buy this certain property when it is completed.  As a result, any stage payments are a an unsecured loan to the builder, and your lawyer must ensure they have the lagally required bank- or insurance garantee (about 20% of Spanish buiders do not have this)  So, a mortgage in Spain cannot finance the dtage payments during the construction fase.  You need either to finance these payments yourself and recover this amount from the mortgage at the end.    or we can help you by arranging a re-mortgage ofyour Uk property for the ammount of the stage payments and aarange the mortgage in Spain for the final payment.

Please note also that a new property cannot be registered untill the firts occupation license has been granted by your developer.

This is the only legal way of proceeding, but some less srupulous builders insist on you paying before the certificate is in place ( wich is not possible if you are getting a mortgage)

It is quite common in Spain for vendors of resale properties to demand that you pay a part of the price in cash and under-declare the officeial value on the escritura.  This practice seems to be particulary common in the more traditional and rural areas such as Valencia, Costa de La Luz and Almeria.  The under-registration itself is not illegal, so notaries will accept it !, but the resultance avoidance of tax is, and you as buyer are held responsable if its discovered by tax agents authoraties and you will have to pay the penalties, wich can be quite severe.  it is also creating a potential CGT liabillity to you for the future, so both for legal and financial reasons we have to advise you not to under-declare by more than 15% (authoroties do not take action under this 15%).  It is often something that vendors will try to slip into the deal at the last minute, it is aswell to make your intentions on this clear form the outset. 

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