Given the recent increase in foreign property purchases in Andalucia and particularly on the Costa del Sol it is hardly surprising that there is strong demand for mortgages. It seems that Spanish banks have been slow to target this market by appointing specialist mortgage advisors.
Despite the majority of local financial institutions expressing great interest in the 'extranjero' market, the strict lending laws established by many banks in the late eighties have made it a complicated affair. The end result is that many foreign purchasers finally give up in despair and, instead, seek additional financing in their home countries.
Traditionally the maximum amount you can borrow against the non comercial property is 80% of the surveyed value or the purchase price (whichever is the smaller) for residents and up to 70% for non-residents. In practice it is now posible to obtain morgages at higher percentages if you are prepared to do a bit of shopping around. 50% is normally the limit on comercial property, but leases are available from some institutions.
In order to check that the purchase price is appropriate and fair, the bank will comission a professional valuation by a 'Tasador' which the mortgage applicant will have to pay for. The cost is likely to be about 150 Euro for a modest dwelling. This survey will record the property's location, construction material, state of repair, size of construction and land in square metres. It will estimate the value of the property. This survey is not to be confused with with the more thorough survey that a Property Surveyor would cary out on behalf of the purchaser to check for defects in the property.
The mortgage lender will also require a search at the local Land Register who produce an official certificate of the corresponding entry. In this way they can check the property is clear of any existing liens or mortgages.
There are other fees to be taken into account. The mortgage deed will have to be signed at the Notary. This is usually done at the time as signing for the property deed or 'escritura'. There will be Notary's fees for the mortgage deed as well as the property deed. Notary fees are established by law and are percentage of the loan. For example if the mortgage is 60.000 Euro, the notary fees will be 500 Euro. The mortgage deed will have to registered at local Land Register together with the property deed. The fees, again, depend on the amount of the loan, you can expect to pay approximately 250 Euro.
The bank or Mortgage lender will enlist a Gestor for to administer the survey, land registry, mortgage deed. The fee for this actual administration is approximately 150 Euro and they are responsible for paying the necessary taxes on your behalf. It is normal practice for a Bank to ask you to deposit money to cover at lease all the above into an account. After a couple of months when the whole proces is complete you should be given a final statements and any extra money taken 'on account' by the gestors should be returned.
The mortgage lender will insist on a buildings insurance (not contents which should be insured separately) The cost is approximately 10 euro per year per 10.000 Euro insured.
The mortgage lender may insist on a life insurance policy for the principal income generator of a family or for both husband and wife.
There is usually a mortgage lender set up comission fee of about 1% on the total mortgage amount. There is often a mortgage lender's early closure fee of about 1% on the remaining mortgage balance. This should not be overlooked as you may want to transfer the mortgage during its term.
Transfering a mortgage mid term can be an expensive exercise due to set up fees, closure fees, notary fees, taxes so get the best deal from day one.
The most common types of mortgage are fixed interest repayment morgages and variable interest rate which are quoted as n% above EURIBOR.