What you need to know when applying for a mortgage loan in Spain in 2024

Mortgage loan in Spain in 2024 – forecasts are optimistic

Spanish banks change lending conditions every quarter, making the mortgage interest rate dependent on the Euribor index. We entered 2024 with Euribor at 4%. High, but the forecasts are optimistic. Inflation in Spain has returned to 3.5%, and the European Central Bank keeps rates at 4% for the second month in a row (after 10 increases from July 2022 to September 2023). Forecasts say that Euribor will decline in 2024. ING Bank expects the ECB's cap rate to drop to 2.5%, while Bankinter is providing a 12-month Euribor rate of 2.2% until the end of the year. After peaking in 2023, interest rates are generally expected to stabilize or begin to decline in 2024.

Can an EU investor apply for a mortgage loan from a Spanish bank in 2024?

Yes. As in previous years, in 2024 every person and company that is able to demonstrate the sources and amount of its income may apply for a loan from a Spanish bank. You should be aware that for the purposes of granting loans, banks distinguish between non-residents, i.e. people whose source of income is outside Spain, and residents whose main source of income is in Spain. Non-residents earning income in other countries must provide the bank with financial documents – preferably translated into Spanish or English, although banks are increasingly refraining from providing translations. They have tax return templates in their systems, e.g. Polish ones, and they know which boxes to look at.

What amount of financing and under what credit conditions can you apply for?

For example, Sabadell Bank offers its clients financing up to 70% of the price or valuation of the property, but takes into account the lower value. In practice, it looks like this: the bank receives information from the client about what kind of property he or she intends to buy and at what price. Usually, at this stage, the client has already signed the reservation document, and often also a private contract, and paid a 10% deposit. The bank asks for a copy of this agreement and an extract from the land and mortgage register of the property. Then he arranges an appraiser from a company cooperating with the bank. The appraiser values the property and presents the valuation to the bank. The client also receives a copy of this document. The valuation fee is the responsibility of the client and costs between EUR 300 and EUR 700, depending on the size of the property. 

Important!

In addition to the minimum 30% own contribution, you must have funds to pay transaction costs that are not financed by the bank. These transaction-related costs are between 10% and 15% of the transaction value, and consist of: progressive property transfer tax (ITP) in the case of real estate from the secondary market or 10% VAT in the case of purchase on the primary market. In addition, notarial and registry fees as well as lawyer's fees. 

What documents should be presented to the bank when applying for a mortgage loan in Spain in 2024?

To submit an application for financing, you must submit a set of documents to the bank.

An individual applying for a mortgage loan in Spain should prepare:

• Completed mortgage loan application (bank form),
• ID card,
• NIE number of the person applying for the loan,
• Contract of employment,
• Tax return for the last two years,
• Confirmation of the last 3 payslips on the employer's form,
• Account statement from the last 6 months,
• Information from Credit Information Office,
• Detailed information regarding existing credit obligations,
• Completed declaration of assets and liabilities (bank form),
• Apartment rental agreement (if any),
• Information regarding the accumulated funds that the client intends to spend on purchasing property. 

For people running a business or company owners, these will be the following documents:

• Completed mortgage loan application (bank form),
• ID card,
• NIE number of the person applying for the loan,
• Tax returns for the last 2 years,
• Company tax returns for the last 2 years,
• Personal account statement from the last 6 months,
• Company account statement from the last 6 months,
• Information from Credit Information Office,
• Detailed information regarding existing credit obligations,
• Completed declaration of assets and liabilities (bank form),
• Apartment rental agreement (if any),
• Information regarding the accumulated funds that the client intends to spend on purchasing real estate.

After receiving such a set of documents and the previously mentioned real estate documents, the bank has between 10 and 14 days to issue a loan decision. Sometimes it happens that the bank will ask the client to complete the documents during this time. This usually happens when the client is several points short of the requested financing amount. If the client has an additional source of income (e.g. from rent) and can prove it, the bank will attach the received document to the rest in order to increase the client's creditworthiness and provide him with the highest possible financing. 

The bank's final offer depends on the customer's creditworthiness. Creditworthiness is calculated based on income, liabilities, family and professional situation and financial status. The bank also always takes into account the property that the client intends to buy.

Sample standard mortgage offer in Spain [January 2024]

Credit conditions based on the example of Banco Sabadell. The bank can offer mortgage loans with variable interest rates to customers outside the EURO zone. 

Details of the mortgage offer:

• mortgage discounted for 20 years,
• variable interest rate, 
• first year 2.75%, 
• next years Euribor + 0.60%, 
• products that reduce the cost of a mortgage include: life insurance, real estate insurance and a Key Account bank account,
• the cost of granting a loan is 1% - 1.5% of the requested amount. 

What does signing a loan agreement look like in Spain?

In Spain loan agreements are signed at a notary. On the day of signing the notarial deed of purchase of real estate, a loan agreement is also signed with an authorised bank employee who appears at the notary's office for this purpose. On behalf of the client, the bank pays all costs related to taking out a mortgage loan: notarial costs, taxes related to the loan agreement and entry in the register.

How can a foreigner pay for property in Spain? 

We have 3 options here:

• Banker's check (less often a transfer) from your account in Spain;
• Banker's check (less often a transfer) from the account of his representative / attorney, if he hired him;
• Transfer from your account in your country of residence.

Good to know!

The most convenient and most frequently used method of payment is a check issued from your own account in Spain. For issuing a banker's check, the bank will charge a commission of 0.4% of the amount. 

Opening an account in a Spanish bank is not complicated, and you will need the account not only at the time of purchasing the property, but also – or primarily – to service it after the purchase. All utility bills will be paid via a fixed debit from the owner's Spanish account. This solution is convenient and protects both parties, the owner and the utility provider. The bank will also collect mortgage instalments from this account. The property owner only needs to remember to top up the account so that there are adequate funds to cover his liabilities.