Summary
Foreigners take out a large number of mortgages in Spain
According to figures from the Real Estate Yearbook of the College of Registrars for 2022, 6.58% of mortgages signed in Spain for the acquisition of a property were signed by foreign citizens.Regions with the highest level of hiring
That said, the autonomous communities with the highest prevalence of mortgages contracted for foreigners were Catalonia (with 24.7% of the total), Andalusia (19.3%), Valencian Community (17.5%) and Community of Madrid (11.5%).However, the largest volume of purchases takes place in the regions with the highest tourist activity; that is, the Balearic Islands, the Canary Islands, the Valencian Community, Murcia, Andalusia and Catalonia.
Countries of origin
Regarding the countries of origin, there is a great deal of heterogeneity, since half of the mortgages correspond to Romanian citizens (10.36%), Moroccans (6.26%), British (5.78%), Italians (5.74%), Chinese (5.18%), Germans (3.86%) and French (3.72%);Does your nationality affect mortgage terms?
As a general rule, mortgage contracting conditions are influenced by, among other factors, the applicant's economic profile, as well as the characteristics of the property and the environment where it is located.That said, nationality can also influence the terms of the mortgage loan agreement; although this is because the credit profile of citizens of a particular country may be considered riskier than that of citizens of another.
In short, the country of origin of the mortgage applicant can be an indication that positively or negatively affects the credit risk rating associated with it.
As we will see in the next section, this mainly affects foreigners who do not reside in Spain on a regular basis.
On the other hand, the banking sector is subject to strong regulatory pressure for the control of money laundering, and is therefore obliged to apply especially rigorous measures to ensure that the investments and operations of its foreign clients comply with the law.
Mortgages for foreign residents and non-residents in Spain
One of the aspects that does significantly influence the conditions of a mortgage loan granted to a foreigner is whether or not they are a habitual resident in Spain.Mortgages for foreigners residing in Spain are standard mortgages, like those granted to Spanish citizens. Mortgages for non-resident foreigners, however, are subject to stricter requirements.
To begin with, not all financial institutions approve mortgages for non-resident foreigners in Spain. In other cases, loans are subject to certain limitations and conditions, which primarily affect the maximum amount to be financed and the interest rate stipulated in the contract.
The main reasons for this restriction are related to the difficulty in dealing with potential late payments from these clients. In other words, in the event of non-payment, it is difficult to take effective legal action, especially in the case of foreigners who are not residents of the European Union.
In fact, in the event of a hypothetical default, it is difficult to proceed with the seizure of assets abroad, so the main guarantee available will be that of the mortgaged property itself.
Requirements to obtain tax residency
For an individual to be considered a resident in Spanish territory for tax purposes, they must meet at least one of these conditions:- Staying in the country for more than 183 days during the calendar year; although sporadic absences will be included in the final count.
- The main core or base of your economic activities or interests must be located in Spain, either directly or indirectly.
- Your legally married spouse and dependent minor children must reside in Spain.
Mortgage loan conditions for foreigners in Spain
The usual mortgage conditions for foreigners in Spain are similar to those for Spanish citizens, except as specified above, as well as some details that affect the documentation.- To begin, it is necessary to open a current account at the bank based in Spain where you wish to take out the mortgage.
- In this regard, both variable-rate mortgages (based on the Euribor index plus a spread) and fixed-rate mortgages are available. The latter option guarantees that the monthly payments will remain constant throughout the life of the contract. It's worth noting that interest rates for non-residents of Spain are generally higher than those offered to residents.
- The applicant's debt level cannot exceed 30%-35% of their usual income; that is, the amount resulting from adding the payment of your future mortgage and the payments of other existing debts cannot exceed this limit.
- On the other hand, the maximum repayment terms range from 20 to 30 years – as an exception – provided the applicant is no older than 70 before the mortgage matures. That said, the maximum terms for non-residents rarely exceed 20 years.
- Providing real estate collateral and personal guarantees improves financing conditions; however, as previously mentioned, properties abroad are not assets that Spanish banks particularly value due to their inaccessibility. For the same reason, personal guarantees must be provided by residents of Spain.
- Finally, taking out a mortgage involves a series of additional expenses, such as notary fees, registration fees, administrative fees, and taxes. These typically represent between 8% and 13% of the property price.
In addition to these general conditions, it is advisable to analyze the following aspects in more detail.
Mortgage credit limits
As a general rule, mortgages in Spain have a credit limit for the purchase of a primary residence equivalent to 80% of the purchase price or appraised value of the property. In the case of a second home – such as a summer residence – the amount is usually reduced to 60%.In short, the applicant must contribute their own capital of between 20% and 40% of the value of the property.
In principle, mortgages for foreigners residing in Spain are governed by these same limits, unless the bank considers that the client's credit profile represents too high a risk and reduces the available financing accordingly.
For their part, foreigners who do not reside in Spain will have to accept the limits of financing a non-habitual home, since their non-resident status makes it impossible for the property to be considered otherwise.
Furthermore, and due to the risks already described above, mortgages granted to residents abroad may have their maximum limit reduced to as little as 50%, if the bank deems it appropriate.
Documentation required for mortgage processing
The documentation required by financial institutions for the feasibility study and subsequent granting of a mortgage is similar for both foreign and national clients.The main difference lies in the specific type of document that proves the economic information required by the bank; that is, the information used to assess the credit profile and solvency of the client.
This is because the specific documentation differs from country to country, the important thing being the data contained therein.
That said, we will now provide you with a list of the usual documents required when applying for mortgages for foreigners:
- Photocopy of the NIE or passport and, where applicable, the certificate that proves non-residence in Spain.
- Tax residency certificate.
- Employment contract and the last 3 payslips received in the country where you reside.
- Tax return for the last fiscal year.
- Bank statement for the account where your salary is deposited, showing transactions for the last 12 months.
- Last 3 receipts for your outstanding debts, such as loans or credit cards.
- Register your current assets, such as property titles or bank accounts.
- Simple registry note of the property to be purchased.
- Purchase agreement for the property or, failing that, the earnest money contract, which is a pre-agreement with the seller of the property.
Credit risk report for non-residents
In the specific case of non-residents, financial institutions request a credit risk report, with the aim of verifying the economic activity and solvency in the country where they reside and work.This type of report is issued by entities such as Experian in the United Kingdom, SCHUFA in Germany, Transunion in the United States, or Transunion CRIF in Russia.
Likewise, proof of the capital contributed must be presented in order to prevent money laundering operations.
Translation of the documentation
All submitted documentation originating from a non-Spanish speaking country must be translated by a sworn translator, at the client's expense.However, due to the rise in mortgages for foreigners, some entities already have their own translators, making it possible to dispense with sworn translation.
Submission of documentation
The usual practice is to require the client to appear in person to present the original documents to the bank, as well as to sign the contract before a notary.However, there may be cases where the financial institution accepts the postal delivery or scanning of this documentation, as well as the appearance of a duly authorized legal representative with a notarized power of attorney. Obviously, this is more common in the case of mortgages for non-resident foreigners.
Even though you have the option to submit the documents electronically, we recommend that you always visit the bank in person. This way, you can receive information and advice from your personal advisor regarding the mortgage application process, the repayment schedule, and all other terms and conditions stipulated in the contract.
We hope this information will be useful to you when taking out a mortgage for foreigners in Spain.
