At present only repayment mortgages are available as following the market crash in 2008 the Bank of Spain informed lenders that interest only products should preferably withdrawn from their portfolios and the lenders attended to this request . The classification of the property you wish to purchase is important. If the property is classified as rustic (not as urban), as may be to be the case with properties in the countryside , the finance options are limited and only a maximum of 50% the lower of the purchase price or valuation shall be considered. It should be noted that properties classified as rustic often are undervalued due to the value that must be given to the land when valuing for lending purposes. The maximum term for a mortgage shall be between 20 to 30 years up to age 65 to 75 depending on the lender.
• Variable rate mortgages. Most mortgages completed on in Spain are variable mortgages, they are reviewed on a yearly/semestral basis. There is a set rate for the first year and the remaining years of the mortgage track the yearly Euribor to which a margin is added.
• Fixed rate mortgages. By fixing the rate of your mortgage you are protecting yourself against interest rate fluctuations. The redemption fees shall be higher than with a variable rate mortgage product.
• Mixed product mortgages. These products allow you to fix the rate of your mortgage during the initial years, the mortgage shall then convert to a variable mortgage.
Besides the more general options below, it is also possible to obtain:
• Self build mortgages. Self build mortgages are available for non resident applicants, the plot must be owned outright. A percentage of the costs of construction are financed, a maximum of 70%, these funds are released as the project advances.
• Purchasing in a company structure. It is possible to arrange lending for a non resident applicant in a company structure, however, options are limited. The percentage of finance may be reduced and rates may be higher. Lenders prefer to not grant mortgages in a company structure, the preference is to lend on a personal basis. When applying for a mortgage in a company name the owners of the company shall be considered as personal guarantors.
As a non resident purchasing in Spain the maximum that can be obtained, unless you are purchasing a property which is part of bank stock, is 70%.
When referring to percentages of finance the lower figure between the purchase price and valuation shall always be taken by the lender.
If you already own a property in Spain which is unencumbered you may be considering releasing equity.
Availability of product for this type of lending is limited, when considered by a lender the reason the capital is being released is carefully considered, there are two key acceptable reasons: the purchase of another property and home improvements.
Remortgages are not easily achieved at present, lenders are currently focused on purchase mortgages. They are considered as exceptions.