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Mortgages

Mortgages for foreigners: what you need to know when buying a home in Spain

It is a fact that more and more foreigners are buying homes in our country; specifically, these operations account for 13% of purchase operations, according to data from the 2018 Register. In addition, it will soon be a fact that foreigners who buy a home for more than €160,000 will automatically receive a residence permit; the Law on Foreigners is working on this. And although the truth is that most of them take out the loan to buy a house in their country of origin, it could be interesting for them to do it here.

For a bank, nationality matters, as the criteria and conditions vary quite a lot. Normally, if the buyers come from wealthy countries, things are easier. And in addition to economic stability and credit profile, the legal system and money laundering control requirements of their countries of origin are important to ensure the legality of where their money comes from.

On the other hand, not all banks grant mortgages to non-residents, due to the difficulty of dealing with possible default: especially if they are non-EU citizens, these entities would not be able to proceed with a possible seizure abroad, the mortgaged property being the only guarantee of collection.

So, if they are finally granted the loan to buy their house, they will do so with very restrictive conditions. Apart from having to advance a certain amount of equity capital, which is also required of Spanish clients (the contribution of equity capital of 20 to 40% of the value of the property, and an additional 10% to pay the additional costs of the property price - management, notary, etc.), foreign buyers will have to pay:

  • A very high interest rate.
  • A maximum loan limit of 70% of the purchase price (compared to 80% for national buyers).
  • A level of indebtedness (which is established by adding the monthly loan payment plus the instalments of other debts) of the applicant of no more than 35% of their usual income.
  • Maximum repayment terms of between 20 and 30%; with the provision of real estate collateral and guarantees.

Mortgage for non-residents

These conditions are tougher in the case of mortgages for non-residents (they will be tougher in terms of the maximum amount to be financed and the interest rate), and also in the case of non-regular housing.

For these reasons, it was normal for foreign buyers to opt to take out mortgages in their countries of origin. However, there are now entities that are changing this mentality, and they have special services for these customers that also include advice and help in the procedures with the notary and the Land Registry.

What the process is like: once the risk analysis has been carried out and if the loan is accepted, the process to follow will be the same as for Spanish customers: the bank will send the offer with all the conditions, the customer will accept them within ten days and the bank will send the documents to the notary; the deed will be prepared and signed, normally contracting the mortgage on the same day.

Necessary documentation: foreigners taking out a mortgage in Spain will need a photocopy of their passport or NIE (Foreigners' Identification Number, which is like a DNI for them), certificate of tax residence, employment contract and the last three payslips from their country of residence, tax declaration for the last year, bank statement with the last year's movements, last three receipts for outstanding debts, register of current assets (bank accounts, title deeds), nota simple of the property to be purchased; and purchase contract or earnest money contract.

In addition, non-residents must submit a credit risk report to prove their solvency. This documentation must be translated by a sworn translator and paid for by the client.

Calle Canónigo Torres 8
03181
Torrevieja (Alicante)
  • Ideal Dream Homes, SL
  • Calle Canónigo Torres 8
  • 03181 Torrevieja (Alicante)
  • +34865754346
  • +34642807995

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