Mortgages Frequently Asked Questions
Purchasing a property in Spain can be very different to purchasing a property in another country. It is therefore essential you understand the advantages of mortgaging in Spain and how Lionsgate Capital can help answer your questions and assist you with the process.
Legal aspects
The number one benefits are the Wealth Tax and Inheritance Tax. When a person buys a property in Spain for more than 700,000 euros they must pay Wealth Tax. The Wealth Tax is on a scale and can be as high as 3.45% per annum on high-end properties. The other important tax benefit is the Inheritance Tax which is also high in Spain. When you have a mortgage, the amount is deducted and tax is only payable on the difference. We recommend that you speak to your lawyer or tax advisor to see what your personal situation is.
Currently, most clients buy their property in their own name, but it is also possible to put the property in the name of a company for specific reasons or structures that they have set up recommended by their advisors.
Most banks prefer the purchase to be made in the name of an individual or, in any case, through a Spanish company (SL), but it is also possible to purchase a property in the name of a foreign company.
Although it is not strictly necessary or obligatory, at Lionsgate Capital we recommend the presence of a lawyer throughout the mortgage process, and we can recommend excellent lawyers to suit each client´s preferences and requirements.
The Número de Identidad de Extranjero (NIE) is the Spanish tax ID you need to be able to buy a property in Spain legally. Normally, your lawyer can apply for the NIE for you, although it can also be obtained from the Spanish embassy in your country of residence.
The valuation is carried out by a surveyor (tasador) and this can be arranged and instructed by Lionsgate Capital at any stage or by the bank once the mortgage is approved. In most cases, the client pays the cost of the valuation, and the cost varies in relation to the property. In some cases, the lender will cover the cost.
Every client is different, and the banks constantly change their rates, products, terms and conditions throughout the year. Therefore, the best bank for each client can change depending on various factors such as the property itself, who is buying, your financials and your preferences and priorities. For this reason, the Lionsgate Capital team make sure we understand your situation and preferences and find the best mortgage and bank for each client at any given time.
Economic aspects
The minimum deposit is usually between 30% and 40% of the purchase price plus the costs involved in the purchase (taxes, notary, registry and administration costs), which are generally between 10% und 14% of the purchase price.
The maximum age for taking out a mortgage in Spain depends on the lender granting the mortgage loan. However, in general terms, the maximum age is up to 75 years old.
The costs involved in a mortgage are usually the following:
- Property appraisal.
- Transfer taxes or VAT.
- Stamp duty.
- Notary.
- Land registry.
- Bank arrangement fee.
- Early repayment fee.
- Home insurance.
- Legal fees.
- Other costs, such as brokerage commission.
If you wish to make early repayments, you will have to pay an early repayment penalty. Since 2019 this fee is regulated by the Spanish mortgage law, which establishes limits depending on the interest rate of the loan and how early the repayment is made. The law establishes that with a variable interest rate the early repayment penalties are 0.25% for the first 3 years or 0.15% for the first 5 years and 0% thereafter. With a fixed interest rate, the early redemption penalty is 2% for the first 10 years and 1.50% thereafter. These penalties are the maximum penalties the bank can charge, and the penalty will only be charged if the bank incurs a loss at the time of early repayment.
The Euribor is the main indicator for variable rate mortgages in Spain. It is calculated as the average of the interest rate at which a group of European institutions lend money to each other in the interbank market. The base rate in Spain is usually the 12-month Euribor.
With a fixed rate you will know what you are going to pay each month for a certain time or for the whole term of the mortgage. With a variable rate the interest rate will be more competitive, but it can go up or down as it is linked to Euribor, or the base rate applied. In Spain all rates are usually fixed for the whole term of the mortgage.
Rather than the type of mortgage, the most important thing is to choose the right bank for each client and that is what the Lionsgate Capital team specialize in.
There are different-types-of-mortgages in Spain, depending on their characteristics and the needs of each person:
- Fixed-rate, variable-rate and mixed mortgages.
- Mortgages for residents and non-residents.
- Lombard loans.
- New-build and construction mortgages.
- Commercial mortgages.
- Interest only mortgage for HNW and UHNW individuals.
If you are a Spanish tax resident, you can generally borrow up to 80% of the total value of the property, while if you are a non-resident, you can generally borrow up to 70%.
Obtaining a mortgage in Spain can be a tedious and lengthy process, especially when comparing several banks. From the first meeting with the Lionsgate Capital team to completion at the notary we estimate a period of 8 to 10 weeks.
It is not a recommended practice and, in fact, many banks do not even accept this option. However, there are some exceptions that should be reviewed individually to assess each situation.
These vary from bank to bank but can include home insurance, life insurance, an alarm or other products depending on the bank. We always aim to reduce the additional products to a minimum for our clients.
It is a report issued in the country you reside in that shows your credit history and includes any mortgages and loans you have today.
About Lionsgate Capital
A mortgage broker is an intermediary that studies your individual case and searches and selects the best mortgage for you based on your personal preferences and needs. Non-Spanish tax residents benefit immensely by contacting a mortgage broker as they have all the experience at a national level, know the terrain and can obtain the best conditions for each client at any given time. Lionsgate Capital are the leading mortgage brokers in Spain.
At Lionsgate Capital we specialize in all types of mortgages in Spain and can accommodate your requests thanks to the network of experts and professionals we collaborate with.
The Lionsgate Capital team is here to help you with all aspects of your property purchase and mortgage. We can introduce you to the best real estate agents if you haven’t contacted one yet. We can also start the mortgage process before you find a property.
When working with Lionsgate Capital you will just have one contact for all banks. We obtain special rates and conditions and ensure we always find the best bank for your personal application. Our mortgage advisors are impartial and will always ensure the best mortgage is obtained to suit your needs. A small difference in the interest rate can make a big difference over the years, we have the banking experience, but we are on the side of our clients. By choosing Lionsgate Capital, clients save time, effort and money and can optimize their property purchase in the smartest way.
Any client can benefit from our services, regardless of the status of the mortgage application and the stage of the process. Clients come to us in 3 different ways: 1) without having contacted the banks and we take over the whole process, 2) having contacted some banks and they ask us to take over and 3) clients also come to us with the bank’s offers and we take over to improve them. In other words, all clients at any stage of the process can benefit from contacting our team.
All banks need a series of documents to be able to fully assess your situation. However, by working with Lionsgate’s mortgage advisors you will only have to submit the documents once instead of giving them to each lender separately, and our team will ensure the best offer is obtained for each client from over 30 banks.
Do you have a question we haven’t answered?
You are one step away from obtaining key information on how to optimize your property purchase in Spain with a mortgage. Arrange an appointment to find out how we can help you. We are your mortgage brokers.Â
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