Mortgage in Spain
The following information is suggested as practical advice which you may wish to take into account when contemplating taking out a mortgage in Spain.
While the FCO hopes that this information is of benefit to our customers, please be aware that it is not intended to be the only guidance purchasers follow. In addition, the FCO makes no representation as to the quality or accuracy of the information which is available at the web addresses listed below, nor can the FCO accepts any responsibility for the content that is hosted on them.
- Do your homework: You should analyse and compare a range of different products and services offered by different lending companies. If you have any doubts about the terms and conditions, ask the lender to clarify
- You should also check that the lender is authorised to operate in Spain on the Bank of Spain’s Registros de Entidades
- Look for the mortgage which is most appropriate for your capabilities and needs. There is a range of different mortgages on offer including fixed/variable/mixed interest rate loans and fixed repayment instalment loans. You should pay special attention to the combination of interest rate and repayment period, fees for setting up the mortgage as well as early repayment/cancellation fees
- Ensure that you have seen a copy of the Property Registry report (nota simple) which enables you to verify the owner (so you can make sure the seller is the actual owner of the property) and check whether there are any debts to third parties outstanding.
- Make sure you fully understand the mortgage agreement you sign. If you have any doubts check with the branch during the 10 working day period after the ‘oferta vinculante’ has been provided
- Check that any information the lender periodically sends you is correct
- If for any reason you cannot keep up the mortgage repayments, you should speak to your bank immediately (before defaulting on repayments) to discuss the options available (e.g. reduce your payments for a set period, extend your mortgage term to reduce your payments, charge you interest only for a set period)
- You should be aware that mortgage legislation in Spain states that the borrower is liable for the total debt borrowed. If you cannot keep up the mortgage repayments, the Spanish bank may repossess your property in Spain. If the value of the property is less than the total debt outstanding (you are in negative equity), the bank may pursue your UK assets to recover the mortgage shortfall using a European Enforcement Order.
Asociacion Hipotecaria Espanola (Spanish Mortgage Association)
Before taking out a mortgage in Spain you may find it useful to read the mortgage guide published by the Asociacion Hipotecaria Espanola (Spanish Mortgage Association).
The Asociacion Hipotecaria Espanola is an organisation made up of banks, savings banks, cooperatives and credit financial institutions which have a major presence on the mortgage market and it has a strong interest in transparency and protection of consumers. The guide is available in English and includes information on choosing a mortgage, documentation you need to present to get a mortgage, repayments, interest rates, fees as well as general information about buying a property in Spain. The website also includes English translations of Spanish legislation applicable to mortgages.
The Bank of Spain states that as a customer taking out a mortgage you have the following rights:
- The right to receive an initial free information booklet which states the loan conditions and the preparatory costs of the mortgage which must be met by the customer (valuation, verification of the property on the property register…) even if the mortgage agreement is not signed in the end
- The right to consult the Central de Informacion de Riesgos del Banco de Espana (CIR) (Department for Risk Information in the Bank of Spain) to check the debt held by the company issuing the loan. The company also has this right if they have given you prior notice
- The right to propose and choose (through mutual agreement with the bank/savings bank) the person or company who will carry out the valuation of the property for which you are seeking the mortgage and who will also be in charge of administrative management of the operation. You can also agree with the company which insurance company will cover the risks which the lending company requires to formalise the mortgage
- As a customer, you have the right to know which professionals carry out the additional services related to the loan, how much they charge and the proof that they provided that service
- The company will usually only agree to contract these services to professionals or reliable companies they have worked with previously, as the company is responsible for the risk of the operation. However, since December 2007, if you provide a valuation certified by an approved assessor which has not expired, the company cannot charge you for a new valuation
- The right to receive a copy of the valuation report (or the original if the operation is not agreed in the end) when the said cost is met by the customer
- Once the valuation and appropriate checks have been carried out, the lending company must provide a written statement of all the necessary information about the conditions of the mortgage they have decided to grant you. This is usually done through an ‘oferta vinculante’ (a binding offer for the lender) which is valid for 10 working days, giving you time to study it and clarify any queries. Alternatively, the lender should notify you of refusal to grant a mortgage
- You have the right to consult the proposed mortgage contract in the notary’s office during the 3 working days prior to it being signed and if there are any discrepancies between this and the binding offer, to request that the notary informs the company so it can be corrected
- To request a copy of the final mortgage agreement from the notary, paying the relevant fee
- To receive the liquidation documents and the receipts for the mortgage.
- To fully inform the lending company about your financial and personal circumstances. The correct information is necessary for the company to conduct a risk analysis of the transaction, before agreeing it. The customer also promises to, if stated in the contract, inform the company of changes of address, marital status, if married whether the property is common property/separate property and other personal and financial circumstances
- To provide the agreed funds for the preparatory costs of the contract (e.g. administrative costs, valuation etc)
- In the majority of cases, to organise damage insurance for the property for which the mortgage is being granted
- To pay the agreed regular quotas and bank commissions on time
- Any other obligations agreed with the lending company, such as, for example, not to rent the mortgaged property without their prior consent if a minimum level of rent is not agreed
- It is advisable to keep a copy of the final mortgage agreement and all documentation relevant to liquidations.