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Spanish mortgages: Ten things foreigners should know before getting one

Although Spain's new mortgage law are good news for all prospective buyers, there are important things to keep in mind if you’re applying for a mortgage for a property in Spain, especially when differentiating between resident and non-resident borrowers.

Spanish mortgages: Ten things foreigners should know before getting one
The beautiful village of Valldemossa on the Balearic island of Mallorca. Photo: Patrick Baum/Unsplash

Favourable new mortgage laws for all

In the past, Spain’s mortgage laws tended to side with the banks and were often punitive to borrowers.

But in 2019 the country rolled out new “hipoteca” (mortgage) laws with favourable conditions for nationals and foreigners (resident and non-resident).

These include longer default periods before repossession, more mortgage fees to be paid by the banks and the green light for borrowers to convert foreign currency denominated mortgages into euros.

FIND OUT MORE: How Spain’s new mortgage laws could affect homeowners

Non-residents pay more than residents

Non-residents will pay higher interest rates than foreign residents in Spain, “around 2.5 percent for 20 years” according to Ricardo Gulias, director of Spanish mortgage consultancy firm Tu Solución Hipotecaria, and a variable rate of 3 percent added to the Euribor index.

The reasoning for this is that non-residents are buying a second home and don’t offer added guarantees such as life insurance or a salary paid into that mortgage-lending Spanish bank.

Banks are also more likely to offer only a fixed type of mortgage to non-residents.

Non-residents get less financing

If you spend less than 183 days in Spain you are less likely to get financing for a Spanish mortgage and will have to put a bigger amount down initially.

Whereas residents will usually be lent around 70 to 80 percent of the total property amount to be paid and get better interest rates, non-residents can only expect a Spanish bank to cover 60 percent of the cost.

Again, this is due to the fact that if Spanish Banks pursue assets in the event of a default, the only thing they could have access to would be the property in Spain.

Credit rating required for non-residents

As an extra guarantee, the bank is likely to ask you for a credit rating statement from your bank in your country of origin.

Experian in the United Kingdom and Transunion in the United States are two companies that provide these services.

Fuerteventura in the Canary Islands is a popular place for foreigners to buy property in Spain. Photo: Niklas Schoenberger 

Longer repayment periods for residents

Unfortunately for non-residents, Spanish banks are far more likely to only give mortgages that are no longer than 20 years, whereas for residents it’s up to 40 years, so their monthly payments are likely to be considerably higher.

Higher taxes when selling for non-residents

Here’s another important factor to keep in mind when calculating how much money you will need to borrow.

When you buy a property in Spain, you need to take into account that the property transaction cost will be 10-12 percent of the property value (it was up to 15 percent prior to 2019). 

This applies to Spanish nationals and foreigners, whether they’re residents or not.

When it comes to selling a property, non-resident sellers have to factor in the Non-Resident Income Tax (IRNR) and the Tax on the Increase in the Value of Land of Urban Nature (IIVTNU or municipal capital gain tax).

This 3 percent IRNR retention on the selling price goes directly to the Spanish Tax Office whereas municipal taxes are usually decided on a more local level. 

READ MORE ‘It’s absurd’: How Britons who let out properties in Spain could see taxes triple after Brexit

Nationality matters for non-residents 

There are reports that when it comes to getting a mortgage from a Spanish bank as a non-resident, your home country can play a big part as to whether it’s approved.

According to IMS Mortgages, prospective buyers from the EU, the US, Australia, New Zealand, Hong Kong and Singapore can get financing for a mortgage relatively easily.

Whereas mortgage applicants from the Middle East, India, China, Russia and Africa struggle by comparison.

At first, this comes across as a discriminatory policy but according to Ricardo Gulias of Tu Solución Hipotecaria (Your Mortgage Solution) “banks have started specialising in operations with clients from north, central and eastern Europe and China”.

This suggests that if there is more demand for property in Spain from emerging economies, more bureaucratic barriers will be broken down for these nationals.

Non-residents have to translate and apostille documents

If you’re not working and living in Spain, some of the documents you’ll need to provide for your mortgage application will no doubt be in another language, and as with everything else that’s official in Spain that’s a big no-no.

Aside from having to pay a sworn translator to do this, some banks will also require you to get the Hague Apostille stamped on some of these documents as an international authentification.

However, residents do have to get documentation notarised when applying for a mortgage as well.

You will also need to get a “Número de Identificación de Extranjeros (NIE) , the Spanish identification number for foreigners, even if you are a non-resident.

Easier to shop around if you’re a resident

Some of Spain’s smaller banks won’t take the risk with non-residents, meaning that choices are more limited.

However, larger banks such as Banco Santander, BBVA and CaixaBank do offer mortgage deals to non-residents, and it’s also possible to get a mortgage for a Spanish property through an international bank such as Chase or IMS or by reaching out to a mortgage broker who specialises in foreign clients. 

It’s not all bad for non-residents borrowers

Despite the fact that mortgages for non-residents are clearly not as favourable as for residents, there are still some positives for this group.

The initial costs and charges related to the mortgage contract are paid by the bank, so the mortgage costs work out cheaper.

The only two charges that can be assigned to a non-resident client are the property appraisal (avalúo de la propiedad ) and the settlement fee (tarifa de acuerdo), and some Spanish banks pay for these as well.

Non-resident borrowers who aren’t from the euro zone can also pay their mortgage in the currency of their country at the exchange rate applicable at the time, if they stipulate it in the contract. 


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For members


INTERVIEW: ‘No lawyer can guarantee you get Spain’s digital nomad visa’

Applying for Spain’s new visa for non-EU remote workers and digital nomads is more troublesome than expected, especially for Americans. Here lawyers reveal the main reasons why a positive resolution isn't always guaranteed.

INTERVIEW: 'No lawyer can guarantee you get Spain's digital nomad visa'

Spain had a real need for a digital nomad visa or DNV, particularly after the pandemic when the government saw that many people around the world were working remotely. They also had to keep up with other European countries that had already launched DNVs such as Estonia, Croatia and Portugal.

Up until now, there was no clear and legal way that remote or freelance workers from outside the EU could come and live in Spain, so the Spanish DNV was warmly welcomed. But since it has launched it seems that not everything is not how it initially seemed and it is not an easy visa to get hold of.

“The Spanish government has not done it as well,” Juan Carlos Lois from letsLaw firm told El Periódico de España.

The problem, he said, is that the government “has mistakenly believed that everything works the same as in Spain and have distinguished between remote workers who work for a company and the self-employed, or freelancers, who have several clients. But the reality is that the most common applicant is someone who owns their own company and is the sole shareholder. They are not an employee or self-employed, but want to come to Spain to continue managing their business”.  

To find out, more about this specific issue, The Local contacted Maryem Essadik, a lawyer at international firm Marfour based in Barcelona.

Essadik explains that the main issue facing these different types of digital nomads when applying for the DNV is the question of social security.

The requirements of the visa state that the applicant must provide a certificate of social security coverage from their country of origin.

“The Spanish authorities have to guarantee that the remote worker has social security coverage in case of accident or disability, and that is why a certificate of social security coverage is required,” explains Essadik.

“Depending on the applicant’s situation, they will register as an autónomo (self-employed) at the Spanish social security office if they’re self-employed or a contractor. In the case they are employees, they will need proof of social security coverage from their country of origin if their country has an agreement with Spain,” she states.

In case the country where they come from does not have a social security agreement with Spain, the company will need to register with the Spanish social security system and obtain a contribution code and start paying it for the employee in Spain and not in their country of origin.

READ ALSO: ‘It seems impossible’ – The problems Spain’s digital nomad visa applicants face

This, however, is an issue because most companies won’t agree to pay extra money just so one of their employees can work in Spain when it’s not necessary.

Spain has social security agreements with several non-EU countries including the US, the UK and Australia so in theory obtaining this social security coverage shouldn’t be a problem, but in reality, it’s proving to be very difficult.

“There are several countries with which Spain, despite having a social security agreement, is not issuing such a certificate and this is making it difficult for employed remote workers to meet all the requirements for their digital nomad visa. This is true for the US, home to the largest number of people interested in moving to Spain,” explains Essadik.

She adds that the US authorities, in addition to taking almost 90 days to process these applications, do not understand the reason for granting these social security certificates, given the existence of a pre-existing social security agreement between both countries for remote workers (for example, for someone transferred from the US office to a Spanish branch as part of a temporary service contract).  

The question of social security coverage is one of the big problems that Spain-bound digital nomads face. Photo: Windows / Unsplash

Essadik, who recently went on a training course at the UGE (the competent authority in the processing and resolution of DNVs) said that US authorities contacted Spain to ask for more information on the matter and said: “It is clear that the Spanish authorities are demanding a certificate based on a legal agreement that is not appropriate for this residence permit”.

This is not the case for all countries, however. Some that have agreements with Spain have indeed produced these social security certificates for applicants. Essadik has personally seen remote workers from the UK, Russia and Ecuador who have been granted their DNVs. However, she believes that the DNV process is discriminatory because it’s a lot harder for some people to apply than for others.

Because of this issue, Lois believes that “no lawyer can guarantee that you will be granted the visa. There are many factors that determine the resolution”.

If you’re a freelancer and work for yourself, however, the situation is a lot easier. Essadik explains that if you are self-employed a simple letter can be submitted, confirming that you will register as autónomo once you arrive in Spain and be in charge of paying the social security fees yourself.

Unfortunately, there are many other problems that lawyers have come across regarding Spain’s DNV application.

The first is that there is no exclusive website catered to the application, Lois tells El Periódico de España. “There is none. The platform in New Zealand is wonderful and tells you if you are eligible or not. Today, in Spain it would be reckless for a foreigner to request a permit on their own without a lawyer specialised in immigration issues to help,” he explains. One box filled out incorrectly will mean your application is denied.  

Essadik agrees and recommends that the process be done with a serious law firm with lawyers registered with the census of lawyers of the Spanish Bar. “The process is not limited only to the knowledge of the list of documents and how to submit the application, but the professional who advises you must have knowledge of all foreign laws and administration along with other branches because errors can be common. We also see errors on the part of the public administration. We are seeing more and more because of the pressure that the UGE has to resolve it in 20 days”, she adds. 

Essadik recommends budgeting between €1,500 to €3,000 for the whole process, including legal assistance.

Like many administrative issues in Spain, there is always a catch-22 situation and for the DNV it seems that it’s no different.  

“The administration doesn’t think about helping people. For example, for the nomad visa you must pay a fee of €76. But to pay it you need the NIE. And to get the NIE you need an appointment, which is not available and is sold on the black market,” Lois says.  

“In general, these are things that could be corrected and they are willing, but they could be more generous,” he concludes.