Can a non-resident get a mortgage in Spain?

Spain, with its year-round sunshine, rich cultural heritage, and vibrant lifestyle, presents an attractive prospect for those looking to invest in overseas property. Perhaps you've entertained the idea of buying a villa along the sandy Costa Del Sol, an apartment emanating the distinctive flavour of Barcelona’s Gothic Quarter, or a rustic farmhouse in the heart of Andalusia. But there's one question that might be casting a long shadow over your Spanish property plans: "Can a non-resident get a mortgage in Spain?"

The short answer is: Yes, you certainly can. However, like with any substantial financial commitment, obtaining a mortgage in Spain involves tackling a series of requirements, meant to safeguard both the borrower and the lender. Although it might seem challenging initially, understanding these can simplify the process and bring you closer to owning the perfect Spanish home for you.

This article aims to shed light on exactly that. We will delve into the specific conditions and criteria that non-residents must meet to unlock the possibilities of owning a piece of sunny Spain. Let's break down the steps, so you know what awaits you on this exciting journey.

Non-Resident Definition

Before we dive into the details, it's pertinent to understand what is meant by non-resident within the Spanish financial context. For mortgage purposes, a non-resident is a person who:

• Does not hold Spanish citizenship
• Lives in Spain for less than 183 days per calendar year
• Has most of their economic interests situated outside of Spain

Having clarified who qualifies as a non-resident, let's plunge into the heart of the topic: the main requirements for securing a mortgage in Spain as a non-resident.

LTV (Loan to Value) Ratio

One of the cornerstone factors that banks scrutinise when approving a mortgage is the loan-to-value (LTV) ratio. Essentially, this ratio represents the percentage of the total property value that you can borrow. For non-residents, this typically hovers around 60-70% of the property's cost.

To paint a clear picture, let's take an example: suppose you've set your sights on a charming villa in Spain listed at €200,000. If a bank offers an LTV ratio of 60%, this means you could potentially borrow up to €120,000 (60% of €200,000). Consequently, you'll need to have access to the remaining €80,000, plus any additional fees and taxes, to secure the property purchase.

Remember, the precise LTV ratios may differ depending on the finer details of your personal circumstances and the lending policy of the bank. Consider shopping around multiple lenders or engaging a mortgage broker's services to ensure you secure the most favourable terms.

Income and Employment

Having a stable income and employment is crucial. Banks require proof of income and employment, usually in the form of payslips, tax returns, and employment contracts. Be prepared to provide these documents as they are essential in determining your ability to repay the mortgage.

Credit Score and Credit History

A good credit score is essential for securing a mortgage in Spain. Banks will assess your creditworthiness based on your credit history and credit score from your home country. Therefore, ensure you have an impeccable credit record, as negative reports, late payments, or defaults may significantly diminish your chances of approval.

Bank Accounts

Having a Spanish bank account is usually a requirement when applying for a mortgage in Spain. Therefore, it's a good idea to open an account before applying for a mortgage. It's equally important to ensure that your account remains in good standing as banks will use it to review your application.

Property Valuation

Before granting a mortgage, banks require an official valuation of the property you wish to purchase. This valuation helps the bank determine the appropriate LTV ratio and repayment terms. It's essential to hire a qualified, independent surveyor to perform the valuation, ensuring an accurate and fair assessment.

Life Insurance and Home Insurance

Banks often require borrowers to take out life insurance and home insurance policies as a way to mitigate risks posed by unforeseen events such as illness, accident, or property damage. These policies must be paid separately and in addition to your monthly mortgage instalments.

Legal Requirements and Documentation

When you're in the market for a mortgage in Spain as a non-resident, being well-prepared with the necessary documentation can significantly smooth the process. The required paperwork can be extensive, as it is used to verify your identity, your financial stability, and your creditworthiness. Here is a list of documents you may need to gather. However, this will depend on the lender and your personal situation:

• NIE (Número de Identificación de Extranjero): This is a tax identification number for foreigners that is indispensable for all foreign transactions in Spain, including property purchase and mortgage applications.
• Proof of Identity: A valid passport is universally accepted as proof of identity. For EU residents, a national identity card may also be acceptable.
• Proof of Income: Proof of income is essential to illustrate your ability to repay the loan. Typically, this will include your most recent tax return and the last three to six months' payslips or proof of income from other sources such as pensions or investments. For the self-employed, this could entail a combination of tax returns, income statements, and profit and loss accounts from the past few years.
• Bank Statements: Lenders will request your recent bank statements (typically the last three to six months) to evaluate your financial behaviour, savings, regular expenses, and other loan commitments.
• Credit History: A credit report from your home country or current country of residence will provide lenders with a snapshot of your financial responsibility. It's an assessment tool that banks use to determine the risk involved in lending to you.
• Employment Contract or Proof of Employment: For those who are employed, lenders will require an up-to-date employment contract. This serves to verify the security and duration of your employment.
• Proof of Property Purchase: This includes a copy of the signed compraventa (preliminary contract) and any payment receipts made towards the property.
• Proof of Existing Property or Assets: Documentation of other properties or significant assets you own may be required, as they could serve as security or indicate financial stability.
• Proof of Debt: If you have other loans or obligations, you will need to provide documents showing the terms and outstanding balances of these debts.
• Spanish Property Valuation: An evaluation report from a bank-approved appraiser is critical because it informs the bank of the property's value, and hence the maximum possible mortgage amount they can offer.

How Long Does It Take?

The timeline for obtaining a mortgage in Spain can vary but typically takes about 4 to 6 weeks from application to approval, provided all the paperwork is in order and there are no unforeseen delays.

It's important to note that all documents from outside Spain may need to be translated into Spanish by a certified translator and be appropriately legalised or apostilled to be accepted by Spanish financial institutions. Additionally, regulations and requirements can evolve, so it's always prudent to liaise with your Spanish bank for the most up-to-date list of required documents and conditions.

Getting a mortgage in Spain as a non-resident can be a complex process. However, by understanding the requirements and keeping your financial records in order, you can successfully navigate the Spanish mortgage market and turn your ideal property into a reality. Remember to enlist the services of a reliable financial advisor or mortgage broker with experience in assisting non-residents to help ease the process and ensure you get the best possible deal.

Now you know you are eligible for a mortgage, why not take the next step and read our article on the types of mortgages available for non-residents in Spain, which properties are eligible and how age can affect your application?