Financing the purchase of real estate in Spain, what do you need to know?
Buying a property in Spain, especially in the primary market, is a dream for many people from all over the world. Several options are available for foreign investors who plan to finance this purchase. It is worthwhile to familiarize yourself with the financing options, the requirements that need to be met and the costs that come with such an investment. In this guide we will discuss the most important aspects of mortgages and other forms of support for foreign investors.
1: Mortgage loans for foreginers in Spain:
Foreign investors can apply for a mortgage from Spanish banks. Here is what you should know:
– loan amount: for foreginers, banks often offer a loan of 60-70% of the value of the property. This means that the investor must have an equity of 30-40%,
– loan term: the standard mortgage term is between 20 and 30 years, depending on the bank and the age of investor,
– interest rate: mortgages in Spain can come in two variants – fixed or variable interest rates. Variable interest rates are usually based on the EURIBOR rate, to which the bank adds a margin,
– requrements for foreigners: documentary proof of income (e. g. employment certificate, tax returns, bank statements),
– credit history,
– NIE (Número de Identificación de Extranjero) number – identification number for foreigners,
– copy of passport and additional documents dependent on the bank.
2: Financing options for residents and non-residents.
Banks in Spain offer different financing terms depending on whether the investor is a resident or non-resident:
– residents can obtain mortgages on more favorable terms, with the possibility of financing up to 80% of the value of the property,
– non – residents, i. e. those who live outside Spain for more than 183 days a year, can expect to finance up to 60-70% of the property´s value.
3: Alternative forms of financing.
For those who are unwilling or unable to take out a mortgage, there are alternative financing options:
– home country loans: it is worth checking whether banks in the home country offer loans for the purchase of foreign properties,
– developer financing: some developers offer to finance part of the purchase directly through them, often on more favorable terms than banks,
– real estate leasing: although less popular, property leasing in Spain can be an interesting option for enterpreneurs or investors looking for flexible solutions.
4: Cost associated with financing.
Investors should consider the additional costs associated with obtaining a mortgage or other forms of financing:
– notary and registration fee: the cost associated with signing the deed and registering the property range from 1 to 2% of the property value,
– property transfer tax (ITP): usually ranges from 6 to 10% of the value of the property, depending on the region of Spain,
– property appraisal costs: banks usually require a property appraisal before granting a loan, which costs between 300-600€,
– property insurance: banks often require the purchase of property insurance. which can increase monthly maintenance costs.
5: Support for a foreign investors.
Spain offers several forms of support for foreign investors, making property purchases even more attractive:
– Golden Visa: purchasing a property worth more than 500.000€ allows the investor and his family obtain a residence permit in Spain,
– financial advisors: many professionals in Spain assist foreign investors in the process of obtaining financing, avoiding the complications of legal and tax formalities.
Conclusions about ¨financing the purchase of real estate in Spain¨:
Buying property in Spain is an attractive investment, especially in the primary market. Foreign investors have access to a range of financing options, from mortgages to property leasing and developer financing. It is important to carefully review the requirements, costs and procedures before deciding to buy, so that the process goes smootly and seamlessly.
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