Spanish bank fees vary but are typically around 1% of the mortgage amount. They also charge around €500 for the mortgage valuation; stamp duty of 1.8% of the mortgage amount; and notary and registration fees of around 0.5% of the amount borrowed.
Lending criteria
there are two main criteria for determining how much you can borrow: the value of the property and your financial credit rating.
Most Spanish lenders take into account your existing bills/liabilities, including mortgage/rent payments, personal and bank loans, and maintenance payments. When these are added to your proposed Spanish mortgage payments, the total must not exceed 35% of your net monthly income.
Proof of income is required by each lender. This can comprise earned income, pension, investment or rental income. However, not all lenders take all of these into account when determining how much you can borrow.
Insurance
Buildings insurance is compulsory and often sold by the spanish lender.
Valuation
Loans are available up to 80% of the mortgage valuation: this limit is set by the Bank of Spain so normally it isn’t possible to borrow more.
Spanish banks lend only on the basis of a mortgage valuation: this is not the same as a market valuation and is carried out as prescribed by Spanish law. The recorded transaction values of at least six similar properties sold in the area in the preceding six months are taken, with the valuer deriving an average price per square metre from these figures. This number is then multiplied by the size of the property you are purchasing to arrive at your valuation.
The nota simple, an abbreviated form of the escritura de compraventa – the official document recording the transfer of ownership from the vendor to you - is provided by your legal representative or the land registry. This document may be required before a valuation can be carried out.
Legal issues
Remember: don’t sign anything until you have taken independent legal advice and don’t put down a deposit before ensuring that it is refundable. You should also check what legal costs and government taxes you are liable for before committing yourself to a purchase or remortgage.
Completion
In order to complete you and the seller need to sign the escritura de compraventa in front of the notary and ownership of the property passes to you. A power of attorney may be used to sign on your behalf.
Applying for a mortgage
It is advisable to arrange a mortgage in principle before committing to a purchase.
I hope this information has been of help to you and please bear in mind that the exchange rate can come back and bite you.
