Dreaming of a lovely second home on the sun-drenched Costa Blanca? Or are you even ready to buy more than one property? Then it's important to get to grips with the financing options in Spain. As a Dutch buyer you can perfectly well take out a mortgage in Spain, but the rules do differ from the ones back home. Let us walk you through the key points, so you can take that step with confidence!
1. How much can you borrow in Spain as a non-resident?
Found your dream home? If you live in the Netherlands and buy a second home in Spain, you can borrow up to 70% of the market value of the property. That means you need a substantial contribution of your own, usually between 30-40%. Let's give an example:
- Say you have your eye on a beautiful apartment in Denia costing €300,000. As a non-resident you can borrow a maximum of €210,000. Is the valuation lower? Then you will have to put in even more yourself. So it's safer to budget with a bit more of your own money. That means putting in €90,000 yourself, plus the additional costs such as transfer tax and notary fees (roughly 11-14% of the purchase price).
For a third property, the percentage you can borrow can drop further still. Banks see that as a riskier investment, so it's wise to take it into account. It's usually around 50% of the property value.
What if you are a resident in Spain?
If you live in Spain and are registered there, you can borrow more for your home. Residents can get up to 80% of the value of their future house financed. That can be handy if, for example, you want to move permanently and can't pay the whole amount out of your own pocket.
Example:
- You want to buy a house for €400,000 on the coast near Javea. If you live in Spain, you can finance up to €320,000 with a mortgage. You have to make up the difference yourself, and don't forget the additional costs that come with the purchase either.
2. What costs come on top of the purchase price?
When you buy a property in Spain, all sorts of costs come on top of the purchase price, and you have to cover them from your own funds. Think of:
- Transfer tax: This is between 6-10%, depending on the region. In the Valencia region transfer tax is 10%
- Notary and registration fees: Around 1.5% of the purchase price.
- Legal fees: Although it isn't compulsory, a lawyer is strongly recommended to make sure everything is legally sound. This costs around 1%. The lawyer really is worth the money. Looking for a good one? We can point you to a good lawyer.
These extra costs come to 11-14% of the purchase price, and they can't be added to your mortgage. That calls for careful budgeting! So you need roughly 40 to 50% of the value of the property in your own funds.
Buying to let: what should you watch out for?
Would you like to let out your Spanish property when you're not staying there yourself? Then it's wise to look at the conditions of your mortgage. Some banks allow it, but you also have to take account of tax rules and permits for tourist letting, especially in popular regions such as the Costa Blanca and the Balearics. Make sure you know all the local rules and meet the requirements, so you avoid problems.
3. What are the mortgage (loan) options with several properties
When buying a second or third property you can in some cases also use the equity in your first home. That works with the equity in a property in the Netherlands. It gives you more financial room, especially when you can't cover all the costs from your own funds. It's worth discussing with your mortgage adviser whether a second mortgage or refinancing is possible. In Spain, refinancing is not possible. So in Spain you can't keep releasing equity and reinvesting it the way we're used to in the Netherlands.
Key documents for a mortgage application in Spain
The process of getting a mortgage in Spain is similar to the one in the Netherlands, but a few extra documents are needed:
- Proof of identity: Passport or ID card. NIE number
- Proof of income: Payslips, or annual accounts if you are self-employed.
- Credit history: A BKR report (Netherlands) or an equivalent document.
- Valuation report for the property: This determines how much the bank is willing to finance. The valuer is usually appointed by the bank.
- Purchase contract and title deed.
Mind the term and the age limits on Spanish mortgages
Most mortgages in Spain can be taken out over a term of up to 30 years, and in many cases you can borrow until your 75th birthday. That's something to keep in mind if you're taking out a mortgage later in life. Are you 60? Then you have to repay your mortgage within 15 years. Which means your monthly payment is a fair bit higher.
Conclusion
Are you looking for your dream home in Spain? Lovely! Do you have equity in the Netherlands? Then a lot is possible. But you do need more of your own money than you would back home. A second or even third property in Spain can be an excellent investment, both for your own use and for letting. But as with every big financial decision, careful preparation is essential. The mortgage options for non-residents in Spain are attractive, but it's important to allow for the additional costs such as notary fees and taxes. Your borrowing capacity also plays a crucial role, depending on your financial situation and the value of the property (or properties).
Always take the time to look into the various borrowing options and get proper advice from experts. That way you can make your Spanish dream home a reality with confidence! Would you like to start looking for a house in Spain? Then get in touch with us.
