Complete Guide to Financing Your Property in Spain with GestaliHome
At GestaliHome, we understand that financing a property can be a complex task, especially for those unfamiliar with the Spanish real estate market. That's why we work closely with trusted financial intermediaries who have experience in the sector and can help you find the best financing option for your particular situation.
In this article, we provide key aspects you need to consider when financing your property:
1. Initial Contribution:
Generally, banks finance up to 80% of the property's value for residents and up to 70% for non-residents. Therefore, you will need an initial savings of 20% or 30% of the purchase price, plus taxes and expenses, which can add up to an additional 13%. If you want more information on this point, you can check out another one of our blog articles: The costs associated with buying a property in Spain: What you need to know before acquiring a new home.
2. Credit History:
Banks favor applicants with a solid credit history, meaning individuals who have demonstrated responsibility in managing previous debts, with no defaults or delinquencies. A good credit history means you have paid loans, credit cards, and other financial commitments on time. Additionally, credit management experience is important, meaning having a long-standing credit history. Another influencing factor is avoiding multiple credit applications in a short period, as it may signal financial instability.
3. Payment Capacity:
Banks in Spain prefer salaried employees with several years of experience, especially those with permanent contracts. For self-employed individuals, it is crucial to demonstrate regular and well-documented income, avoiding large fluctuations in billing. Additionally, certain job sectors are more valued for their stability, such as technology and healthcare, as well as public sector professions like civil servants and teachers.
4. Number of Applicants:
The number of people applying for the mortgage influences the conditions the bank may offer. If there is more than one applicant with income, the risk for the bank decreases. However, all applicants’ profiles will be thoroughly reviewed, meaning that all must have a good financial history and stable income.
5. Debt-to-Income Ratio:
This indicator reflects the percentage of monthly income allocated to debt payments, including the mortgage installment and any other active credit. Banks typically set a prudent limit: the total of these payments should not exceed 33% of the applicants’ combined monthly income. While having credit experience is positive, having multiple outstanding loans can affect credit evaluation.
Practical Example:
Suppose you apply for a loan with your partner. Both have monthly incomes of 2,000 euros each, totaling 4,000 euros. Additionally, you have a car loan with a monthly payment of 300 euros and are applying for a mortgage with a payment of 600 euros.
Debt-to-Income Ratio Calculation:
Since the result is 22.5%, it is below the recommended 33%, indicating an acceptable debt level for most banks.
6. Your Age at Loan Term Completion:
Keep in mind that the maximum age at loan completion cannot exceed 72 years, although some banks may extend it to 75 years. This means the last loan installment must be scheduled so that it does not exceed this age limit.
7. Work with Trusted Professionals:
At GestaliHome, we can recommend trusted financial institutions and mortgage advisors with experience in the Spanish real estate market. These experts can guide you on the different financial products available and help you find the option that best suits your needs and specific circumstances.
Bonus Track: Frequently Asked Questions
The ideal mortgage choice depends on two key factors: your financial situation and market trends.
If interest rates are high at the time of applying, for example, above 3%, opting for a mixed mortgage may be advisable. This type offers an initial fixed-rate period with a lower interest rate for at least five years, followed by a variable rate, such as Euribor + 0.5%. On the other hand, if the market offers low rates, a fixed mortgage could be the best option, ensuring you pay the same installment throughout the loan term.
Fixed-rate mortgage: The monthly payment remains stable throughout the loan term, regardless of market fluctuations.
Variable-rate mortgage: Adjusts periodically based on the Euribor, meaning the installment may increase or decrease.
Mixed mortgage: Combines an initial fixed-rate period followed by a variable rate, which can be beneficial in high-interest rate environments at the time of signing.
Yes, Spanish banks can grant mortgages to foreigners, although the requirements may be stricter than for residents. To apply for a mortgage in Spain as a foreigner, it is advisable to follow these steps:
- Obtain a NIE (Foreigner Identification Number).
- Provide proof of income and financial stability.
- Demonstrate credit history.
- Make a higher initial deposit (minimum of 30% of the property value).
- Choose a bank with experience in foreign clients.
Once the mortgage is selected, the bank will request the necessary documentation, a process that may take between 3 and 7 business days. Then, the property appraisal is conducted, usually taking 5 to 10 business days.
Next, the contract is signed with the bank, outlining the loan terms. After 24 - 48 hours, the FEIN (European Standardized Information Sheet) is issued, which must be accepted at least 10 days before signing the mortgage deed. During this period, the future mortgage holder should carefully review the offer before making a final decision.
Finally, the mortgage deed is signed before a notary, and within 15 - 45 days, the property will be officially registered in your name.
The process can take between 4 and 12 weeks, depending on the bank and the speed at which documentation is provided.
Contact:
Phone: +34 604 22 57 09
Email: [email protected]
Office: Plaza Músico Óscar Tordera Iñesta 11, 03004, Alicante, Spain
