What to expect when buying a mortgage in Spain as a non-resident

LAST UPDATED: 8 Aug, 2017 @ 14:08
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Columnist Tancrede de Pola

BUYING a property in Spain for non-residents can be difficult, but not impossible.
Some Spanish banks may not lend money to people living abroad, whether they be Spaniards or Brits, but many others will.
It is important to know the ins and outs when borrowing to avoid unpleasant surprises.

 

Expect to pay more

Non-resident expats will pay higher interest rates than those with resident status. A fixed-rate mortgage is around 2.5% for 20 years.
With a variable rate, you can expect the fixed part added to the Euribor index to be between 1.1% and 1.25%.
Non-residents pay higher interest rates because they are buying a second home and will find it harder to meet some conditions that could reduce costs, such as having a bank-associated life insurance or a salary that gets paid into the bank.

 

Expect a 20-year, fixed-rate mortgage

Banks like to give fixed rates to help ensure the amount the purchaser repays is steady.
This helps offset uncertainty and reduces risk later on.
The usual maximum repayment period for non-residents is 20 years while non-residents can extend it to up to 40 years.

 

Expect to be lent less money

Even though as a rule, a mortgage should not be more than 80% of the value of the property, residents in Spain are often able to borrow up to 100%. In the case of non-residents, the figure is usually around 60%.
This is because in the event of non-repayment, the bank’s only guarantee is the property itself.

 

Expect to provide a credit rating

Non-residents are usually required to provide a credit rating from their country of origin or residency. These are provided by Experian in the UK. The origin of any money the buyer puts in has to be accounted for. This is part of efforts by authorities to combat money laundering.

 

Expect to translate all documentation

All paperwork from outside Spain will have to be translated, while some banks will also require the Hague Apostille, an international authentication similar to a notarization. This can be sent by email to the bank for confirmation, but the contract must be signed by the interested party or by a legal proxy.
If you’re a non-resident foreigner, you should request a NIE (Foreigner Identification Number) at a police station or in a Spanish embassy or consulate.

 

Expect to pay 3% tax when you sell the property

Taking out a mortgage in Spain does not grant you residency.
This means non-residents will be subject to the same legislation as Spaniards, but will have to declare the property bought in Spain on their tax return at home.
When non-residents sell their property, they will have to pay a municipal tax, as well as 3% of the value to the Spanish Tax Office.

 

 

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