If you’re not a resident in Spain, what are your mortgage options?

What Spaniards living abroad and foreigners looking to buy property here need to know

There is growing overseas interest in Spain's property market.
There is growing overseas interest in Spain's property market.García-Santos

Buying a property in Spain for non-residents can be difficult, but is not impossible. While some Spanish banks do not lend money to people living abroad, whether Spaniards or non-nationals, many others will, but it is important to know the ins and outs when borrowing to avoid unpleasant surprises.

You’re going to pay more

To begin with, Spaniards living abroad and non-resident expats will pay higher interest rates than they would if they were resident here. A fixed-rate mortgage, the usual option in this case, “is around 2.5% for 20 years,” says Ricardo Gulias, the director of financial intermediaries Tu Solución Hipotecaria; with a variable rate, the fixed part added to the Euribor index “is between 1.1% and 1.25%.” Gulias adds that buyers will have to take out home insurance.

The reason non-residents pay higher interest rates is 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 one’s salary paid into the bank,” says Santiago Cruz del Pozo of mortgage advisers Ibercredit.

You’ll have a 20-year, fixed-rate mortgage

Fixed-rate mortgages are the most common for buyers who live abroad. “It’s the most common system outside Spain and banks prefer to give fixed rates so that the amount the purchaser repays is steady,” says Gulias. This is one way to offset uncertainty and reduce risk down the road. “The usual maximum repayment period for non-residents is 20 years while non-residents can extend it to up to 40 years,” adds Gulias.

You’ll 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 tends to fall to around 60%.

This is because in the event of non-repayment, the bank’s only guarantee is the property itself. But Gulias says that this tends to apply to foreigners, while Spanish expats, particularly those with family connections in Spain, can often secure 100% financing.

You’ll have to provide a credit rating

Aside from an employment contract, salary payroll, tax return and job record, non-residents are usually required to provide a credit rating from their country of origin or residency. These are provided by SCHUFA in Germany, Experian in the United Kingdom, Transunion in the United States, and Transunion CRIF in Russia. The origin of any money the buyer puts in has to be accounted for as part of efforts to combat money laundering.

You’ll have to translate all documentation

Not only will any paperwork from outside Spain have to be translated, some banks also require the Hague Apostille, an international authentication comparable to a notarization in domestic law. 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.

You’ll pay 3% tax when you sell the property

Taking out a mortgage in Spain “does not confer residency,” warns Gulias, meaning that 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.”

Non-residents should also be aware that when they sell their property, they will have to pay a municipal tax, as well as 3% of the value to the Spanish Tax Office.

The obstacles foreigners face

If you are a non-resident foreigner in Spain, you should know that “Spanish banks prefer the United States and EU members,” says Cruz, adding that “it’s still possible for banks to work with people from other countries.” Gulias points out that “banks have begun specializing in operations with people from the north and east of Europe, and China.”

English version by Nick Lyne.

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