All Spanish banks provide loans and overdrafts and are quite happy to do so for foreign residents, particularly if they are homeowners. It pays to shop around for a loan as interest rates vary considerably depending on the bank, the amount and the period of time.
Most banks will have a standard criteria before considering a mortgage application. For example, you have to be 25 years or over, in full time stable employment, or have been self-employed for a minimum of three years. How much you can borrow will depend on how much income you receive and what financial commitments you have. In general, you can borrow up to 70 percent of the purchase price of the property or to a maximum of 2.5 times your gross annual income. In order to check that the price is appropriate and fair, the bank will request a professional evaluation. This comprises a detailed report in respect to the quality of construction and material use, the situation, state of repair, etc. of the property and, most important of all, its market price which takes all the above into account.
The fee for the evaluation is approximately 275 euros but obviously varies according to the size of the property. A search must also be made in the Land Register and a certificate issued for the corresponding entry to check on the possible existence of other mortgages or loans made against the property. If the home you are buying is still under construction, the builder may require the cost of the property to be paid in a series of payments. Most lenders can provide a mortgage that matches these requirements subject to certain safeguards.
Financial institutions will offer you a choice of repayment plans which usually include: Endowment Mortgage - whereby every month or quarter you make two separate payments, one for the interest on the loan, the other for the premium on the endowment policy. Capital Repayment Mortgage - whereby you make either monthly or quarterly payments of interest and capital on the mortgage. During the early years, each monthly payment comprises mainly of interest. In later years, more of the capital is paid off. You will generally be given a period of up to 20 years to repay your mortgage and it is your responsibility to ensure that you have a suitable mortgage protection policy to repay the loan if you die before the end of the mortgage term (often a bank will require you to take out a mortgage protection policy). In general, you can expect to pay approximately 10 percent of the property purchase price in associated taxes and fees.
To learn more about mortgages as well as other lending possibilities, click here.