Contents:
- Mortgage in Spain
- Requirements for mortgage registration in 2024
- Documents for applying for a mortgage in 2024
- The most common mistakes when applying for a mortgage
- We will help you buy a property in Spain
Mortgage in Spain
Nowadays, Spanish banks offer the lowest interest rates in the last 10 years, while property purchases are growing rapidly. According to the Spanish College of Registrars, the number of real estate purchases increased by 145.9% between May 2020 and May 2021. In the current conditions, many people are thinking about buying a property, but do not have enough savings.
Now is a good time to get a mortgage loan on the best terms. Juan Villen, Head of the Idealista real estate portal under the heading «Mortgage» analyzes the situation in the Spanish real estate markets and states: «There are good prospects until the end of the year. Firstly, due to the consumers' interest in buying housing remains and there are enough offers to keep the volume of transactions high. The pandemic has led to an increase in demand among families for more spacious housing with homesteads on the outskirts. At the same time, the market in the city center remains stable. In addition, the volume of new construction has increased to levels that we have not seen for fifteen years». Juan Villen also adds that in an era of uncertainty and lack of alternative investments, the real estate sector is again becoming a good choice for investors.
Favorable credit conditions
The second aspect that inspires optimism is the favorable situation in the mortgage issue. Juan Villen notes: «Banks are liquid, and they need to lend. There is competition in attracting customers. In addition, rates and long-term financing remain low. Banks offer mortgage loans with a fixed rate for 30 years below 1%. This strong competition allows you to get very favorable conditions».
Before choosing, it is important to compare individual offers from different banks.
One obstacle: lack of savings
The unresolved issue of the Spanish market remains access to loans for young clients who, as a rule, have a stable income, but do not have the necessary initial savings. As a result of the last crisis, banks stopped issuing loans to everyone. The Bank of Spain and the European Central Bank (ECB) are closely monitoring that the requirements are strictly observed. In this sense, the lack of savings remains an obstacle to buying a first home. Although the initial payment is low, the problem is the absence of at least 20% of the total price plus the costs of the operation, which in large cities range from EUR 50,000 to EUR 60,000.
This problem can be solved in three ways. One of them is that the insurer covers the risk - 80% of the total cost. The second way is public support. In the UK and Italy, there are programs that allow banks with the help of state guarantees to lend to young people buying their first home. This option does not seem viable at the moment, given the situation with Spanish public debts. The third way assumes that banks take on more risks. Some offer a mortgage of 80% financing for a period of up to 40 years or more. However, these options do not solve the problem.
Looking for the best offer
Nevertheless, now is a good time to get a mortgage in Spain on the best terms. Juan Villen recommends planning, studying and comparing bank offers. It is not enough to resort to simple bank comparators. It is important to get personalized offers from different banks and compare all the variables before choosing.
Requirements for mortgage registration in 2024
To get approval for financing when buying real estate, you need to know the requirements of banks and fulfill it.
1. Savings of at least 30% of real estate prices
The first of the requirements for applying for a mortgage and obtaining approval in 2024 ‒ this is the presence of a sufficient amount of savings. Nowadays, banks do not provide the entire amount of the mortgage and usually cover up to 80% of the purchase price or valuation. Therefore, it is necessary to have 20% of the amount of the new property available.
To this should be added the cost of purchase costs, which is from 10 to 12% of the housing price.
If the house costs about EUR 100,000, you need to have about EUR 30,000 (30%) to get a mortgage on favorable terms.
2. Sufficient income to pay contributions
It is necessary to have a good monthly salary. The minimum may vary, but usually it should be about three times the monthly fee.
In this regard, the Bank of Spain recommends allocating no more than 35% of income for repayment of financial debts, including the mortgage contribution.
If you need a mortgage for a second residence, the conditions of banks are more demanding: the minimum income should be about EUR 2,500 and other additional guarantees, etc.
3. Stable job
Another requirement of banks is the availability of a permanent job with an experience of six months or more.
It is especially important for freelancers or entrepreneurs to prove their stability. To do this, you must provide documents confirming the successful state of the business and experience: recent tax returns, profit and loss statements, etc.
4. Excellent credit history
Another aspect that any bank will consider before providing a mortgage loan is the credit history.
If the borrower is a malicious defaulter, the bank will not approve the loan application.
Similarly, if there are many loans, it is necessary that the amount of all debts does not exceed the recommendation of the Bank of Spain on loans.
5. Additional guarantees
If the bank considers the client's financial condition to be insufficiently suitable, a guarantee can be of great help.
Nevertheless, the guarantor bears mutual responsibility for the debt, assumes certain risks, assuming the following obligations:
- Responsibility for the debt on property both present and future.
- In case of the borrower's death, a mortgage loan is reissued for his heirs, and the guarantor remains the same.
- If the guarantor dies, the heirs perform his functions.
Documents for applying for a mortgage in 2024
To confirm compliance with the requirements for applying for a mortgage, you must provide all the documents requested by the bank:
- DNI (Identity Card) or NIE (Tax Identification number).
- Certificate of work experience.
- Income tax declaration.
- Bank account statement.
- Documents establishing ownership.
- Latest loan receipts.
- Lease agreement.
- Confirmation of other income or rent.
These are the basic documents that are usually requested from any bank. However, each financial institution has its own criteria. During an online operation, all documents can be sent by e-mail.
What is the maximum age for getting a mortgage loan?
As a rule, the age of the borrower should not exceed 70, 75 or 80 years at the end of the mortgage term.
What should I do if any of these conditions cannot be met?
- Other payment guarantees or surety.
- Waiting for the right time when the economic and financial situation in the country will improve.
The most common mistakes when applying for a mortgage
According to the real estate agency The House Agency, six out of ten Spaniards who are going to sign a mortgage agreement do not know about at least one of the five most important points.
These are the five most common mistakes when applying for a mortgage:
- Start with debt. For most banks, it is necessary to have 20% of the real estate value, in addition to other purchase and mortgage costs, the amount of which varies depending on each autonomous community. Usually, to cover this part of the amount, buyers take loans from other banks. This creates the risk of excessive debt, which can jeopardize mortgage payments.
- Pay attention only to the interest rate. It is necessary to take into account all mortgage expenses. These are not only percentages, but also commissions, and other related products. 75% of contracts signed with banking organizations have a close relationship with them, which can have counterproductive consequences if it is not taken into account initially.
- Financial resources. According to experts, more than 12% of future home buyers do not have sufficient resources for a possible economic emergency.
- The expenses only on mortgage contributions. A common mistake of borrowers is the misconception that their income will be used only to repay the mortgage. However, other common types of expenses (utility bills, large purchases) and exceptional ones (wedding, vacation, training) are not taken into account. To calculate the amount of debt, the Bank of Spain recommends that the monthly contribution does not exceed 30% of income.
- A detailed research of the contract before signing it. The Bank is obliged to provide the contract at least three days before its signing. Thus, it is necessary to carefully read the documents, since after the notarial signing, changes cannot be made.
- The last but not least, the presence of an expert. The consultations are necessary to eliminate all doubts and verify the correctness of the agreement.
We will help you buy a property in Spain
Spain-Real.Estate offers a rich selection of apartments for sale in Spain. Whether you are looking for a vacation property or a purchase for subsequent rental, experienced agents will help you choose the best offer that suits your goals and budget. Our team of professionals will accompany the entire process of buying real estate and will help to arrange all the documents to ensure a safe transaction. Check out the current real estate offers on our website.