Procedures and Requirements for a mortgage in Spain

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The mortgage is a real security right, which is constituted to ensure the fulfillment of an obligation, commonly to pay a credit or loan, which confers on its holder a right to realize the value of an asset. Next we will detail the requirements for a mortgage in Spain.

Requirements to request a mortgage

The main requirements that are requested to grant a mortgage loan have to do with the economic solvency of the client, although they are not the only ones. In Spain the most common requirements to access a mortgage are the following:

  • Have a fixed income: financial stability is vital to any mortgage grant. The bank will always request payroll reports in order to better understand the applicant’s income stream.
  • Initially contribute at least 20% of the appraisal price of the home: this is what is known as «entry», and it is a requirement that banks ask of their customers. For this reason, it is very important to know the approximate appraised value of the property, since it is usually a “cut-off figure”.

In accordance with Royal Decree 716/2009, on the regulation of the mortgage market, a maximum limit of financing allowed for loans and credits is established, which normally means that a financial institution does not grant mortgage loans above 80% of the appraised value.

Documentation to request a mortgage

The documents necessary to request a mortgage in Spain are the following:

  • Holder’s identification number or holders who are applying for the mortgage. It would be the DNI (National Identity Document) or the NIE (Foreigners Identification Document).
  • If the applicant (s) have a loan that they already own, they will have to collect the documents that show it. It is usually advisable to have the last paid receipts and also know the time left to pay.
  • Deeds of other real estate that they own as property the mortgage applicant (s).
  • Most recent income tax return, comprising a formal summary of the economic situation of the last year.
  • Recent bank statements They will provide more information to verify the economic situation of the applicants.
  • Updated official summary of working life.

With the selected property

  • Deposit contract for the property to be acquired. If the house has not yet been selected, there will be no deposit contract, but it is not essential for the entity to make an assessment of the granting of the mortgage.
  • Information related to the property. A simple note from the land registry will go a long way in corroborating the data.
  • Property deed, if the purchase and sale contract has already been signed.

Documentation for contract workers

  • Work contract, the type of contract that will benefit the most from the granting of the mortgage will be the civil servant or indefinite contract. Seniority is also important when assessing viability.
  • Copy of the latest payrolls.
  • If you are an official, it would be positive to record that the inauguration has been six months or more ago.

Documentation for freelancers

  • Annual VAT return and quarterly payments for the current year. The annual income tax return and the fractional tax for the current year.
  • Proof of having paid the last self-employed fees.
  • The proof of having made the last payments to Social Security.

Steps to request a mortgage

The steps to request a mortgage in Spain are very simple, they basically consist of:

  • Calculate the fee with the simulator.
  • Choose the mortgage that best suits your needs, by installment, terms, packs, interest rate, etc.
  • Fill in the application form.
  • When the form is received, you will be contacted to request additional information (payroll, personal income tax, photocopy of DNI, etc.)

Subsequently, all the data will be analyzed by the bank, and if feasible, the appraisal of the desired property will be requested. If everything is correct, it only remains to follow the instructions to sign before the notary.

Who can ask for a mortgage?

It is important to note that not everyone can obtain a Mortgage Credit. It is advisable to verify the most common conditions established by the banking entities, included below:

  • Have money saved: This is because banks no longer lend 100% of the property’s value, but can mostly grant up to 80% of what the property costs. In some exceptional cases up to 90%, in case the client has a considerably high salary.
  • Have 25% of salary to pay: dividends are currently 25%, therefore it is recommended to have the same percentage to pay the desired credit. For example, if the salary is 1600 euros per month, 400 euros must be available to pay the fees.
  • Fixed salary: if on the contrary, if they work independently and the salary is variable, they will refine the monthly earnings by 20% or 30% in order to obtain an insured amount per month. Since banks are so rigorous with variable salaries, those who work in a dependency relationship and have fixed earnings benefit.
  • Labor Old: One of the most common requirements to access a loan is to have been in employment for more than twelve months, continuously and without work stoppages.
  • Do not have debts: the banks always verify the state of debts of the requesting clients and their previous histories to the request of the mortgage loan.

How long does the mortgage approval take?

From the moment the form is received, the approximate term to sign a mortgage is approximately between 2 and 4 weeks, although the term can be extended, depending on the agility to obtain the documents and the coordination of the appointments with the appraiser and the notary.

How is the amount of a mortgage calculated?

The interest on a loan is the amount of money that is paid to a lender in addition to the principal. Typically, interest is calculated as a percentage, such that the interest rate is a certain fraction of the principal.

A mortgage loan is a type of loan used to finance the purchase of a property. The interest on a mortgage loan can be calculated using the interest rate, the principal value (price of the property) and the conditions of the loan (duration and number of payments).

The calculation can be done in several ways, depending on the information that is had and in turn on the personal preferences of the applicant. Here are some ways to calculate the amount of a mortgage:

  1. Use an online home loan calculator– There are a wide variety of online calculators that can help you determine your monthly payment and interest paid by entering some important information. Doing a search for home loan calculators on the web is recommended. Typically, some loan details will need to be entered, such as the number of years, the annual interest rate, and the principal value.
  2. Calculate total interest using loan payments: This method will allow you to calculate the total interest that will be paid on the loans, assuming you already know an estimate of the monthly payment. However, the monthly payment will have to be multiplied by the number of payments to determine the total amount to be paid over the life of the loan.
  • Review the monthly payments, either on a recent receipt or in the loan agreement.
  • Multiply the monthly payment by the number of payments.
  • Subtract principal from total payments. This number represents the total amount that will be paid in interest over the life of the loan.

For example, if 400 euros are paid per month for a loan of 57,600 euros that must be paid in 15 years, 400 euros must be multiplied by the number of payments, that is, 180 (12 months for 15 years), to obtain a result of 72,000 euros. The total interest paid would then be 4,400 euros (72,000 euros – 57,600 euros).

What is a mortgage?

The mortgage is that contract by which a loan is taken as collateral for an asset that it is generally constituted by a property. The property remains in the hands of the owner as long as he fulfills his obligations; otherwise, the creditor can make the sale of the property to collect the money he gave on loan.

The contract that constitutes a mortgage must be registered in the Property Registry in order to have value for third parties. In the event that the borrower defaults on his payments, a lawsuit is filed, to a conviction and to the auction of the property. Thus, as a contract, a mortgage only imposes an obligation on the debtor and is regulated in accordance with the law.

The three most important aspects of a mortgage are: the capital, which is the money loaned by the bank and which is usually less than the price of the property in order to be covered in a possible auction; the interest, which indicates the extra percentage that must be paid to the entity that granted the loan and which can be fixed or variable; and finally, the term, which is the time that includes the return of the capital.

Mortgage types

There are two kinds of mortgages, voluntary and necessary. Those that are constituted by the spontaneous will of the debtor, or to fulfill an obligation imposed by the owner of the mortgaged property, are voluntary. The necessary mortgage exists when it is constituted to comply with a legal provision.

In the same way, they can be classified according to the interest rate, comprising:

  • Fixed: if the interest does not vary throughout the life of the loan.
  • Variable: if the interest varies at any time. In most variable rate loans, an initial term is established, commonly the first year or the first six months, in which the interest is fixed. It should be taken into account that, almost always, this interest for the first year is higher than that which would result from applying the variable interest that is going to be applied later; so that the first installments of the fixed interest period would be higher than the subsequent ones
  • Mixed: when the interest rate remains fixed for an initial period greater than 1 year and then it is variable

Where to apply for a mortgage in Spain?

In Spain there are banks as very good offers in mortgage matters, below we detail the most common:

  • OpenBank Santander Group
  • Banco Bilbao Vizcaya Argentaria (BBVA)
  • Santander Bank
  • ING Bank
  • popular Bank
  • COINK bench
  • Bank Bank

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