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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


Okupas: What’s the law on squatting in Spain?

In recent years the Spanish squatting movement ‘Okupa’ has been on the rise. But with new legalisation aimed to remove squatters faster, what exactly is the law on squatting in Spain?

Okupas: What's the law on squatting in Spain?

Squatting has long been a controversial issue in Spain.

Some point to the more than 3 million empty properties across Spain and the cost-of-living crisis as reasons to be more understanding when people can’t pay the rent.

Yet Spain’s ‘okupa’ movement is much more than that, with organisations intent on exploiting legal loopholes, or individuals who own their own properties which they rent out to others whilst they occupy ones that don’t belong to them.

Unfortunately, Spain’s evictions drama, which largely stems from people who can no longer pay their mortgages, has become mixed up with the country’s squatting problem.

Critics say the Spanish law abandons property owners and that there are too many legal obstacles which hinder squatters’ speedy eviction.

In the ten years from 2001 to 2011, the number of empty homes in Spain increased by 336,943 (an increase of 10.8 percent) to stand at 3.4 million according to the latest data available from the INE’s Population and Housing Census.

But as the number of empty houses increases, so has illegal squatting.

It’s hard to be certain about how many properties exactly are currently occupied in Spain, as squatting is a clandestine act and there isn’t a record of how many properties have been reclaimed by owners. According to interior ministry data, more than 10,000 homes have been illegally occupied every year since 2015. In 2021, it reached a record 17,274 cases.

Some studies point to a slight decrease in the first half of 2022, others to continuingly high figures. What’s clear is that squatting is an ongoing problem in Spain, with an average 49 reported cases a day.

Okupas can be found across Spain but the regions that tend to have the most are Catalonia far ahead, followed by Madrid, Andalusia, the Valencia region and the Canary Islands.

READ ALSO: Squatting in Spain: Which regions have the worst ‘okupa’ problems?

The law

The occupation of someone else’s property does constitute a crime in Spain, as established in article 245 of Spain’s Penal Code: “Whoever occupies, without due authorisation, a property, dwelling or building belonging to someone else and which does not constitute their residence, or remains in the property against the will of the owner, will be punished with up to three to six months of prison”.

However, sentences in Spain under two years usually don’t result in actual prison time, which doesn’t act as a dissuasion for okupas.

Spanish law also differentiates between usurpación (misappropriation) from allanamiento de morada (breaking and entering), the determining factor for the judge being whether the property is inhabited or not in terms of taking action against the okupas.

Fortunately, second homes are still considered a morada (dwelling) in Spain, as long as they are furnished and have all the basic services such as water and electricity. Therefore, they receive the same protection as first homes.

And yet, the devil is in the details.

If the okupación is reported within 48 hours and it is the first home of the owner, police officers may evict the squatters without the need for a court order. However, if more than 48 hours have passed and it’s a second home, things get more complicated.

The first 48 hours of ‘okupación’ are crucial to determine whether a proprietor will need a court order to return to their property. (Photo by Odd ANDERSEN / AFP)

Squatters are often familiar with the law and use the principle of inviolability of the home to plead their case. By changing the locks they legally enforce this, as not even the owner can enter without a court order.

The squatters have the upper hand in this sense; if the true owners break in, the okupas can sue them, and if the proprietors don’t pay the bills, they’ll go on a defaulters’ list. They’ll use other tricks such as having goods ordered to the address to prove that it’s their morada (dwelling) and having minors at the property to strengthen their legal protection.

In the meantime, all the owners can technically do is open legal proceedings against the squatters by placing a complaint (civil or penal) and proving that the property is indeed theirs and the squatters aren’t unfairly treated tenants or similar.

If you hadn’t guessed already, having your home occupied by squatters in Spain can work out to be a legal nightmare that lasts months, dare we say longer.

The Local Spain has written in detail about how homeowners in Spain can prevent this from happening to them.

Europe’s worst?

Experts say that Spanish property owners are among some of the worst protected in Europe.

According to Arantxa Goenaga, partner and lawyer at Círculo Legal Barcelona, “if we compare with the rest of the European Union, the situation in Spain is worse and much more unfavourable for the owner, not only because the judicial procedures are slower but also because greater protection measures are adopted for vulnerable citizens without any measure that favours the owners.”

Homeowners and legal experts alike have complained about the complicated legal structures surrounding squatting and evictions. Often, this means squatters are allowed to stay for months – even years – while the legal process is underway.

Fortunately for homeowners, the Spanish government is trying to do something about this.

2022 changes to the law

On October 5th, the governing party PSOE received plaudits for making changes to the Code 544 of the Law of Criminal Procedure to speed up evictions of squatters within a maximum period of 48 hours.

However, the new speedy evictions relate only to “trespassing or usurpation of real estate” and not those pre-existing tenants who simply stop paying rent and refuse to leave the property.

This second method, of simply refusing to pay rent and staying, is the most common method of squatting in Spain, accounting for around 70 of all cases, according to the lobby group La Plataforma de Afectados Ocupación.

This means that though the government’s measure is a positive step for homeowners, it does little to tackle the majority of squatting cases in Spain. It may speed up some evictions, but will likely do little to speed up or resolve the lengthy ongoing legal battles many property owners find themselves in.

Squatters in Spain often use the principle of inviolability of the home to increase their legal protection. (Photo by Tobias SCHWARZ / AFP)

What should I do if squatters move into my home?

The first 48 hours are crucial if your home or second home is illegally occupied.

If you can prove that squatters moved into your property within this two-day period, you can take the matter to the police and they can evict the okupas without a warrant.

If 48 hours have elapsed and the squatters have changed the lock, you will require a warrant and that’s when the legal ordeal begins.

You will have to file a request for eviction (demanda civil de deshaucio) and the judge will set a time and a date for you and the squatters to appear in court. Crucially, many okupas refuse to identify themselves or attend proceedings, which effectively stalls the process.

If any of the occupants are minors or vulnerable people, the judge is more likely to side with the squatters.