Mortgages in Spain, how do they work?

Applying for a Spanish Mortgage – A Complete Guide

For many Dutch and Belgian people, buying a home in Spain is a long-cherished dream. Not everyone can pay for a home entirely out of their own pocket. In that case, a Spanish mortgage may be an option.

Although mortgages in Spain are broadly similar to those in the Netherlands, there are important differences. Spanish banks often finance a smaller portion of the property’s value, require extensive documentation, and assess foreign buyers differently than Spanish residents.

Anyone who needs financing would therefore be wise to first explore their mortgage options and only then begin viewing specific homes.

This will help you avoid falling in love with a home that ultimately doesn't fit within your budget.

Would you like to see which properties are available right now? Then check out our current listings in Spain.

How does a mortgage work in Spain?

A Spanish bank doesn't just look at the home you want to buy.

The bank primarily assesses whether you will be able to continue making your mortgage payments for the entire term.

In this regard, the following factors, among others, are taken into account:

• income;
• income stability;
• existing loans;
• other mortgages;
• age;
• family situation;
• credit history;
• available equity;
• and the value of the home.

For foreign buyers, financial documents are often reviewed more thoroughly than in a standard Dutch mortgage application.

How much can you borrow to buy a home in Spain?

For non-residents, financing is often capped at approximately 70% of the purchase price or appraised value, with the lower of the two values typically serving as the basis for calculation.

That means you'll have to pay for a significant portion of the home out of your own pocket.

On top of that, there are also the purchase costs.

A simple example:

Suppose you buy a home for €200,000 and the bank finances up to 70%.

In that example, the maximum mortgage would be:

€200.000 × 70% = €140.000

You must then contribute at least €60,000 of your own funds toward the purchase price itself.

In addition, you’ll need to factor in taxes, notary fees, registration fees, legal fees, and other costs associated with the purchase. In the example from this guide, the total down payment for a home priced at €200,000 comes to approximately €85,050.

The actual costs depend on the home, the region, and your personal situation.

Keep purchase costs out of your mortgage budget

This is one of the key differences from how many Dutch buyers are used to thinking.

For example, if you have €250,000 in total funds available, that doesn't automatically mean you can look at homes with a purchase price of €250,000.

The costs of purchasing a home in Spain must usually be paid from one's own funds.

That's why it's a good idea to do the following calculations before you start looking for a place to live:

How much can I borrow for a mortgage?

én:

How much of your own money will be left after the purchase costs have been paid?

Only then will you know what price range you should actually be looking in.

What does a Spanish bank look for?

Income

A stable income gives the bank more certainty.

A fixed salary or pension is generally easier to assess than income that fluctuates widely or is temporary.

Other sources of income may also be taken into account—for example, rental income—depending on the bank and how this income can be documented.

Existing Financial Obligations

Do you already have any financial obligations? If so, they will be taken into account during the assessment.

For example:

• existing mortgage;
• personal loan;
• lease agreement;
• revolving line of credit;
• other sources of financing;
• and certain credit facilities.

So the bank doesn't just look at what comes in each month, but also at what goes out each month.

Ratio of Income to Monthly Expenses

A commonly used guideline is that total financial obligations should not exceed a certain percentage of net monthly income.

The original guide suggests approximately 30 to 35% of net income as a rule of thumb.

If you already have a mortgage or loan, that will limit your ability to take out a new Spanish mortgage.

Age and Term

Age also plays a role.

Spanish banks require that the mortgage be fully paid off by a certain maximum age.

As a result, a 40-year-old, for example, may be able to get a longer loan term than someone who buys a home later in life.

For people who want to spend their retirement in Spain, it is therefore especially important to look into financing options in advance.

A shorter loan term usually means higher monthly payments.

Credit History

Your credit history will also be reviewed.

For Dutch buyers, for example, a BKR report can be requested. Negative entries may affect the mortgage application.

The bank may also request additional documents to further verify your financial situation.

Have your mortgage options calculated before you go to view a property

We advise buyers who need financing not to spend weeks looking at homes first.

Have it reviewed in advance:

• the maximum amount you can borrow;
• how much equity capital is needed;
• what monthly payment is feasible;
• and what the corresponding purchasing budget is.

This allows you to search much more specifically within the listings of homes in Spain.

This also prevents you from making a reservation on a property before it is clear whether financing is feasible.

What documents does a Spanish bank require?

Applying for a mortgage in Spain involves quite a bit of paperwork.

The specific documents required vary by bank and individual situation, but you are often asked to provide both personal and financial information.

Personal documents

Examples include:

• passport;
• address information;
• marital status;
• family situation;
• occupation;
• the date you started working for your employer;
• or proof of retirement income.

In addition, you'll need a NIE number to purchase a home.

You can read more about this on our page about NIE and residency in Spain.

Financial Documents

The bank may ask for, among other things:

• recent pay stubs;
• pension statements;
• proof of other income;
• tax returns;
• annual statements;
• bank statements;
• information on existing mortgages;
• credit report;
• and information about other loans.

If you are a self-employed business owner or a director and major shareholder, you may be required to submit additional business documents.

Gathering all the necessary documents is often one of the most time-consuming parts of the mortgage application process.

Do the documents need to be translated?

That depends on the bank.

Some banks accept certain documents in Dutch or English, while others require translations or additional statements.

Therefore, check first to see which documents your chosen bank requires before having everything translated.

Otherwise, you may incur costs for documents that ultimately turn out to be unnecessary.

Should I approach one Spanish bank or several?

Mortgage terms may vary by bank.

That doesn't just apply to interest.

Maximum loan amounts, loan terms, age limits, acceptance of different types of income, and the speed of the assessment process may also vary.

It may therefore be a good idea to compare several banks.

The downside is that you have to resubmit documents and answer questions every time you submit an application.

A mortgage advisor can make this process easier.

Why Use a Mortgage Advisor?

An advisor who regularly works with foreign homebuyers is generally familiar with the various banks and their approval criteria.

This can be especially helpful if your situation isn't entirely standard.

For example:

• entrepreneur;
• multiple sources of income;
• rental income;
• retirement income;
• existing home in the Netherlands;
• different nationalities;
• or a purchase made with a partner.

An advisor can help you determine in advance which banks are the most promising.

Which Spanish banks offer mortgages?

The original guide lists several well-known Spanish banks that offer mortgages, including:

• Banco Santander;
• Bank of the West
• CaixaBank
• Banco Sabadell;
• Bankinter;
• Bank

The terms and conditions vary by bank and sometimes even by application or branch.

So don't choose a bank just because you're familiar with its name.

Ultimately, the best mortgage is the one whose terms fit your personal situation.

How can you tell if a mortgage lender is trustworthy?

When dealing with a Spanish bank or financial institution, pay attention to the following, among other things:

• registration with the Banco de España;
• experience working with international clients;
• clear information about interest rates;
• transparent costs;
• clear terms and conditions;
• and good accessibility throughout the application process.

The original guide also identifies digital communication and clear information about additional costs as key considerations.

Differences Between a Spanish and a Dutch Mortgage

Although both systems are based on the same basic idea—borrowing money using one's home as collateral—there are clear differences.

Maximum funding

In the Netherlands, a much larger portion of the home’s value can be financed for a primary residence.

In Spain, foreign buyers generally have to bring significantly more of their own money.

Term

According to the original guide, Spanish mortgages typically have a term of about 20 to 25 years, although longer terms are possible in some situations.

Age

In Spain, age plays a significant role in determining the maximum term.

Documentation

Spanish banks often request more financial information from foreign buyers, which can cause the process to take longer.

NHG

A system like the Dutch National Mortgage Guarantee does not exist in Spain in the same way.

Fixed or Variable Interest Rates in Spain

Spanish banks may offer various types of interest rates.

Depending on the time and the bank, you may encounter:

• fixed interest rate;
• variable interest rate;
• or a hybrid form.

With a variable-rate mortgage, for example, the interest rate may be tied to the Euribor.

The best type of interest rate depends on your personal preferences, the term of the loan, and your financial situation.

So don't just look at today's interest rate; also consider how your monthly payment will change if interest rates fluctuate.

Mortgage for a Second Home in Spain

Many Dutch and Belgian buyers take out a Spanish mortgage for a second home.

This could be, for example, an apartment on the coast or a villa that you use yourself for part of the year.

Popular regions include the Costa Blanca, Costa Cálida, and Costa del Sol.

When it comes to a second home, the bank will assess your financial situation, including any housing costs you may already have in the Netherlands or Belgium.

So an existing mortgage isn't excluded from the calculation just because the new home is in Spain.

Mortgages When Moving to Spain

If you move to Spain permanently, your mortgage application may be evaluated differently than if you remain a nonresident.

Residency status may affect:

• maximum funding;
• income that is accepted;
• terms and conditions;
• and administrative requirements.

Anyone who is buying a home and emigrating at the same time would therefore be wise to carefully coordinate their mortgage, NIE and residencia, and home search.

Mortgage for a New Construction Property in Spain

A mortgage can also be used for new construction in Spain.

This just raises an additional point to consider.

Payments for new construction are typically made in several installments while the home is still being built.

A mortgage is not normally used simply to finance each interim payment to the developer.

This means you may need sufficient funds of your own to make payments during construction.

Therefore, have your financing plan reviewed before you reserve a newly built home.

View the current new construction listings here.

Mortgage for Existing Homes

In the case of an existing home, the process is often more straightforward because the home already exists and can be appraised.

The bank usually has the property appraised before granting final financing.

It is important to note that the bank does not consider only the purchase price.

If the appraised value is lower than the agreed-upon purchase price, the maximum amount you can borrow may also be lower.

That's why a low appraisal could mean that you unexpectedly need more of your own money.

Never make a purchase without considering financing options

One of the biggest risks arises when you reserve a home while the financing is still completely uncertain.

In Spain, a financing contingency—as Dutch buyers are familiar with it—is not automatically included in every contract.

Therefore, make sure to have the following checked thoroughly in advance:

• what you draw;
• the amounts you pay;
• when those amounts are refundable;
• and what happens if the mortgage isn't approved in the end.

You can read more about the buying process in our guide to buying a home in Spain.

Mortgage through a Dutch BV

The original guide states that Spanish banks are reluctant to grant mortgages to foreign legal entities, such as a Dutch BV.

Anyone who wants to purchase real estate through a business will therefore have to navigate a very different financing process than a private homebuyer.

This must be examined separately in advance.

Mortgage Through a Spanish S.L.

According to the guide, a Spanish Sociedad Limitada (S.L.) can obtain financing, but only under commercial terms.

These may include, among other things:

• lower financing rates;
• different interest rates;
• additional documentation;
• company financial statements;
• and additional warranties.

For a standard second home, purchasing through a corporation is therefore not automatically more attractive than private ownership.

Buying Real Estate as an Investment

Anyone who isn't just looking for a second home but actually wants to invest in Spanish real estate needs to consider financing and tax implications together.

For example:

• one or more rental properties;
• long-term rental;
• vacation rentals;
• private purchase;
• or a purchase through a company.

The chosen structure may have implications for taxes, administration, financing, and the eventual sale.

Always seek individual tax advice on this matter.

Taxes When Buying a Home

The original guide distinguishes between existing buildings and new construction.

Transfer tax is paid on existing homes.

In new construction, IVA and AJD, among others, play a role.

The exact percentages vary by region and situation.

That's one more reason to always consider the region where you're buying when determining your purchase budget.

For example, a home on the Costa Blanca is subject to different regional tax rules than a home on the Costa del Sol.

Rentals and Mortgages

Would you like to rent out the property?

Discuss this in advance with both your financial advisor and your legal/tax advisor.

Renting may have an impact on:

• tax;
• insurance;
• yield;
• maintenance;
• and sometimes the way in which the financing is evaluated.

In particular, when it comes to tourist rentals, it is also important to verify whether renting out the specific property is legally permitted.

Read more on our page about investing in real estate in Spain.

What happens when you sell the home later?

Taxes also come into play when selling Spanish real estate.

The original guide mentions, among other things, tax on realized gains and the municipal plusvalía.

The amounts ultimately due depend on, among other things:

• purchase price;
• selling price;
• documented purchase costs;
• investments;
• tax residency;
• and ownership structure.

So this, too, is very personal.

Example: Financing a home priced at €200,000

A concrete example illustrates the difference between purchase price and actual down payment.

Purchase Price

€200.000

Mortgage at 70%

€140.000

Down payment for the home

€60.000

On top of that, there are the purchase costs.

The original sample calculation mentions the following:

• tax: €20,000;
• notary: €1,500;
• attorney/trustee: €2,000;
• Registration fee: €650;
• administrative fees: €400;
• NIE/Power of Attorney for two people: €500.

In the example, this results in €25,050 in other expenses.

The total personal contribution will then be:

€60,000 + €25,050 = €85,050.

Please use this primarily as an illustrative example, as the actual costs may vary depending on the purchase.

How do you determine your actual housing budget?

We would therefore approach the process in the following order:

1. Determine how much equity capital is available.
2. Calculate your maximum mortgage amount.
3. Set aside enough money to cover the purchase costs.
4. Next, determine the maximum home price.
5. Only then should you start comparing homes in a targeted manner.

That makes the search much more efficient.

You can then search the current listings or look specifically at new construction and existing homes.

Which region fits within your mortgage budget?

With the same budget, you can find a wide variety of homes in Spain.

On the coast, you often pay more for the location.

A little further inland, you'll often find more space.

On the Costa Blanca, for example, you can check out Ciudad Quesada, Torrevieja, Guardamar del Segura, Orihuela Costa, Rojales, Benijófar, Los Montesinos, and San Miguel de Salinas.

Those looking for a wider range of options can also consider the Costa Cálida or Costa del Sol.

First, secure financing; then, look for a home

Ultimately, this is the most important message.

If you need a Spanish mortgage, you don't have to wait until you've found a specific home before seeking financial advice.

In fact, you can have a lot of calculations done in advance.

Here's what you need to know:

• how much you can borrow;
• how much of your own money is needed;
• What monthly payment works for you?;
• and what price range we should look for on your behalf.

This makes the search for a home a lot more concrete.

Buying a Home with a Mortgage Through Casas Palmeras

Casas Palmeras assists Dutch and Belgian buyers with purchasing a home in Spain.

If you need a mortgage, we can tailor your home search to your financial situation and connect you with professionals who have experience with Spanish financing.

Among other things, we can help you with:

• determining your housing needs;
• search within the appropriate budget;
• Compare new construction and existing buildings;
• scheduling viewings;
• guidance during the purchase;
• legal support;
• and practical matters related to the transfer.

Learn more about our approach or view the current listings right away.

Would you like to find out first which home fits within your mortgage budget and personal funds? If so, please fill out the questionnaire for your home search or contact Casas Palmeras with no obligation.

A Spanish mortgage can help you finance your home in Spain, but the most important thing is to know exactly how much you can borrow, how much of your own money you’ll need, and what additional purchase costs will apply before you start looking for a home. With that information, you can search for your Spanish home in a much more targeted and secure way.