Susan Worthington is a Financial Adviser at the Spectrum IFA Group here in the Baleares.   She writes again with an update to inform us that the company have now introduced and established a new service geared towards solving the high demand of mortgage enquiries they receive. 

The process – what happens?

The mortgage process in Spain can really be narrowed down to the 6 steps below:

  • Decide. There can be big differences between e.g. a fixed and a variable mortgage, so depending on your time horizon and risk profile one option will be more relevant than the other.
  • Paperwork. Documenting your situation is the key when setting up a mortgage and the more complete your file is when you present it to the bank, the quicker you will get results.
  • Underwriting process. This happens once your complete file has been handed over to the bank and they start studying your case.
  • Mortgage offer. This is when the bank gives you their offer in principle or the “oferta vinculante” as it is called in Spain. At this stage it is very important you understand what is being offered. If you are not sure on how to interpret a Spanish mortgage offer, it is strongly recommended that you seek professional help.
  • Insurance. In Spain it is mandatory to have a home insurance that covers the value of the property. Life insurance is not mandatory but most banks will encourage you to be covered and in return they will likely give you a better rate.
  • Completion. Once you have signed the mortgage offer, the notary and the bank will contact you to set up a date for completion. The whole process usually takes around 3 weeks, if there are no complications.

The numbers – are you eligible?

At the moment in Spain the banks will lend up to 80% of the value of the property to residents. Depending on individual circumstances this can be slightly higher, but at the discretion of the bank.

For non-residents the percentage is 60-70%. Again this depends on your specific situation, so these are a basic guideline.

Something that many people fail to realise is that on top of the deposit that will be required, they will also have to cover the costs involved in setting up a mortgage. The costs are normally around 10-15% of the property value which in reality means that a resident needs at least 30% of the property value in savings to be able to proceed with the purchase. For non-residents this number is between 40-50% of the property value depending on the mortgage they’re able to get.  A considerable difference.

Our recommendation – what can you do?

If you are looking to obtain a mortgage in Spain and concerned about the process and procedures or even the language, it is recommended that you seek professional help and appoint mortgage specialists to take care of matters on your behalf.   

One other point is for people who already have a mortgage.  Make sure that you know what you have and what conditions and clauses have been written into the contract. Recently we reviewed a mortgage for a client and found that the deed did not coincide with the contract. In the contract the applied rate was 0.5% higher than in the deed. When the client queried this with the bank the apparent error resulted in her being paid back the difference straight away. If we hadn’t discovered the bank’s oversight, she would have paid a good deal extra throughout the mortgage because she was not aware of any discrepancy. With this experience in mind, we would like to encourage everybody to look through the papers (a job when you have insomnia perhaps?) to ensure that everything checks out – the bank may be erroneously overcharging you.

If you wish to contact Spectrum Mortgages: call 971 696292 / 695289181 or email christian.severinsen@spectrum-ifa.com