I have some doubts regarding mortgages: I’m going to buy a house in Spain and the developer wants me to buy into the existing mortgage, but perhaps I should apply for a new one, what is the difference? If I decide to apply for a new mortgage, how much would I be able to borrow? Should I set up my mortgage in Euros or in Pounds Sterling? What would be the maximum time to repay the loan?

Mr. Claydon

A mortgage is the normal way to finance a property when you do not have the full purchase price at the time of signing the title deeds, in this case before the Spanish Notary. The mortgage is a contract between the lender and the borrower to assure that the borrower will repay the debt, otherwise the property pledged will be lost.

If you decide to buy into the existing mortgage, you would literally take on the responsibility of repaying the existing mortgage the developer has for the remainder of the term together with all the terms and conditions originally agreed to. The mortgage would simply be transferred completely into your name.

Regarding the amount you can borrow, this will obviously depend on the value of your property. As a general guideline, non-residents can borrow between 60% and 70% of the property value; this percentage increases to 80% of the value for residents.

The amount of the loan also depends on your income. As a rule, banks will usually lend up to three times your gross annual income, but they rarely authorise a loan that will result in monthly repayments that exceed 33% of your net disposable income per month.

Regarding the currency, there is virtually no exchange control in Spain and you are therefore free to apply for mortgage on your property in any currency and from any bank in the world. However, we would strongly recommend that you set up your mortgage in euros since this will protect you from running into problems due to currency fluctuations. It is true that Spanish banks offer some of the lowest interest rates in Europe (under 5%) and are happy to lend to non-resident property purchasers.

The maximum period on the repayment of a loan is usually 15 years, but mortgages can sometimes be arranged up to a 30-year period. The crucial factor here is the age of the borrower. The borrower, or eldest partner in the case of a joint mortgage, must be under 65 at the end of the mortgage term. So, if the eldest partner in a couple is 55 the maximum repayment term a bank would be prepared to offer is 10 years.

It is important to remember that in Spain a mortgage is attached to the property rather than the person and is registered on the title deed (Escritura Pública) at the Property Registry Office (Registro de la Propiedad).

As for most aspects of property purchase in Spain your lawyer can arrange a mortgage for you, and we also offer this service.