Buying Property in Spain; Cash or Credit?
So you’ve found that perfect home… all you need now is money! Do you use your savings or do you take on a mortgage? These are two relevant questions, as when buying a home in Spain the legal costs vary depending on which of the two options you choose. I always advise our clients that allowing 13% on top of the purchase price will cover you for all legal costs when buying with cash, however you’ll need to budget for 15% on top of the purchase price if you take on a Spanish Mortgage. The tax for purchasing a resale property is 10%; mortgage or not, but it’s the other incidentals that push the costs up like Notary, Land Registry, Mortgage Processing and Lawyer’s Fees.
An example with one of the local banks is a Mortgage rate at 3% fixed over 25 years. This is available to any Non-Resident of Spain up until their 74th birthday. When applying for a Spanish Mortgage, you’ll need to provide Proof of Income, Bank Statements, Salary Slips or Pensions, Credit Report and N.I.E. Certificate. All other documentation will be related to the house you intend to purchase, i.e. Reservation Contract, Title Deeds, etc. of which your Agent will be able to provide.
Most Agents can help with your mortgage application and the local Banks have English speakers. If your Mortgage processing fee is more than 1% you need to get your negotiation skills at the ready, as they do try to charge a little more. The difference will be your Agents’ commission for introducing you to that particular Bank. I strongly believe no Agent should be compensated for their recommendation. If you are a Non-Resident of Spain, you could borrow up to 60% of the purchase price. Some Banks do offer up to 70% but be careful if you are offered 100% as a Non-Resident... I have done my research and they do not exist! All Banks are happy to deal with the client direct but I know from experience, many clients feel more comfortable when being introduced to a preferred bank.
Remember however, Spanish Mortgages are the same as they are everywhere else in the world… if you do not keep up with the repayments, the home will be at risk of being repossessed, so don’t let your dream become a nightmare.
So when it comes to making an offer on that “Dream Home”…. Mortgages are obtainable but cash is always King!