Real Estate Financing In Spain

Spain is an extremely popular destination for foreign property buyers. The Iberian sun, vibrant culture, excellent cuisine and breathtaking landscapes attract thousands of people every year who want to fulfill their dream of owning a vacation home in Spain.

If you as a German are considering buying real estate in Spain, financing is a crucial aspect you need to consider. In this comprehensive guide you will find answers to all your questions about getting a mortgage in Spain as a German citizen.

Can Germans easily get a mortgage in Spain?

As EU citizens, Germans have very good chances in general to get loans from Spanish banks for purchasing property. Most financial institutions consider customers from Germany as creditworthy and low-risk due to the country's economic stability.

However, banks' requirements differ quite a bit. Not all lenders provide mortgages to foreigners, and conditions can vary. It is therefore advisable to get offers from multiple banks for comparison.

What conditions must German buyers meet for Spanish financing?

For a Spanish bank to approve a loan for buying property, you typically need to meet the following requirements:

  • Income in Euros: Most banks only provide loans for real estate purchases in Spain if your income is in Euros.
  • Creditworthiness: You must be able to prove that you have a good credit rating and are considered creditworthy. For this you need to provide documents such as proof of income, tax returns etc.
  • Down payment: A down payment of 20 to 30 percent of the purchase price is usually required.
  • NIE: You need a Spanish NIE number (Número de Identidad de Extranjero), which is a tax identification number for foreigners.
  • Spanish bank account: A bank account with a Spanish bank is necessary for receiving and repaying the loan.

Make sure you are familiar with and meet all the requirements of the bank where you want to apply for credit.

Which Spanish banks are most likely to provide mortgages to Germans?

Many Spanish banks do provide loans to German property buyers. The following institutions have proven to be particularly open to financing inquiries from German customers:

  • Banco Sabadell: Their loan process is tailored to the needs of foreign buyers and barely requires translations of German documents. There are interest rate discounts for opening an account and taking out insurance.
  • Banco Santander: Santander bank usually accepts German documents in the original language and has even provided financing for properties below 100,000 Euros.
  • CaixaBank: Interest rates can be reduced by up to 1 percent through bonus programs. They are generous in assessing creditworthiness based on expected rental income.
  • Banco Bilbao Vizcaya Argentaria (BBVA): BBVA offers fixed and adjustable rate loans with terms up to 30 years. However, they mostly limit their offerings to Euro income earners from abroad.

This list does not claim to be exhaustive. Be sure to check directly with any banks for current offers and conditions.

What interest rates must German buyers currently expect?

Mortgage interest rates in Spain, like in other Eurozone countries, are oriented on European monetary policy. After years of record low rates, financing costs have been continuously rising in Spain as well since mid 2022.

According to statistics, foreign borrowers had to pay average interest of 5.5 percent in Spain in October 2022. Top offer for variable rate loans came from Cajasur bank at 6.44 percent annual percentage rate. For fixed rate mortgages, Selfbank still had an offer at 3.64 percent effective annual interest.

With rates currently in flux, it is advisable to regularly get up-to-date financing offers from multiple providers. Qualified mortgage brokers can often negotiate better conditions.

Step-by-Step: How to Apply for a Mortgage in Spain

Once you've decided on a property in Spain, financing is the next step. Here is a step-by-step guide on the process for Germans:

  1. Apply for NIE Number

    Nothing moves without a Spanish NIE number. You can apply for it in person at the competent Spanish consulate in Germany. Alternatively, an authorized representative can submit the application for you in Spain. Inform yourself beforehand about required documents.

  2. Gather Documents

    For your loan application you need to submit numerous documents proving your identity, creditworthiness and solvency – from ID cards over proof of income to bank statements. Make sure early on that you have all required current paperwork ready.

  3. Get Initial Offer from Bank

    As soon as you've identified a promising property, promptly obtain a concrete financing offer from your bank of choice. This allows you to determine whether the purchase fits your budget and what conditions apply to you.

  4. Initiate Property Valuation

    An individual appraisal of the real estate by an expert appointed by the bank is required as part of nearly all loan requests. Initiate this early on, as appointments are often booked out weeks in advance.

  5. Request FEIN from Bank

    Before signing, you need to obtain the "European Standardized Information Sheet" (FEIN) from the financing bank, detailing all relevant loan data like APR, fees etc.

  6. Sign at Notary Office

    Once all formalities are fulfilled, the notary public certifies the contract. In the presence of the seller you'll sign both the purchase agreement and your mortgage loan.

  7. Collect Keys to your Property

    With everything processed at the notary and land registry, you finally get to collect the keys to your new home in the Spanish sun. Congratulations!

Helpful Financing Tips

Here are some useful hints that can facilitate getting a mortgage:

  • Apply for financing if possible while you are in permanent employment. This minimizes default risk in the eyes of the bank.
  • Provide the bank with up-to-date German payslips, tax returns and bank statements, ideally translated into Spanish.
  • Use mortgage broker services comparing offers from multiple banks to obtain potentially better conditions.
  • The norm in Spain is down payments of 20 to 30 percent. The more own funds you can contribute, the better chances for a favorable interest rate.
  • 100% financing without own capital is only possible in exceptional cases – for instance for very high-value properties or private banking clients.
  • Apply for financing in a timely manner – the entire process can easily take two months. Agree on an adequately long completion deadline with the seller.

What are additional costs for a mortgaged home purchase in Spain?

When budgeting for your loan, keep in mind that various fees and taxes apply for real estate purchases in Spain that are not part of the actual financing:

  • Transfer tax (Impuesto sobre Transmisiones Patrimoniales): Between 6 and 10 percent of purchase price, depending on region
  • Notary and land registry fees: Approximately 1 to 2 percent
  • Surveyor costs: Around 500 to 1,500 Euros
  • Real estate agent fees: Usually 3 to 5 percent commission; typically paid by seller
  • Legal fees: Approximately 500 to 1,500 Euros
  • Translations: Around 30 Euros per page
  • Insurances: Depending on property and contents, 500 to 2,000 Euros annual premium

These items can quickly add up to 10 to 15 percent of the purchase price. A higher down payment amount may allow you to reduce or avoid some of these extra charges.

Key Questions and Answers at a Glance

Is full 100% financing possible for property purchases in Spain?

Extremely rare. As a rule, Spanish banks finance 70 to 80 percent max of the purchase price, own funds are required for the remainder. Only high net worth individuals may get access to products allowing for complete external financing in some cases.

How long does it take until the financing contract can be signed?

After submitting the complete paperwork, initial offers are often issued within days. Signing at the notary typically happens one to two months after that.

Can financing be applied for together with a partner?

Yes, banks usually look positively at joint credit applications by spouses or partners with shared finances. Additional security and joint income improve the chances of success significantly.

What documents do Germans need for the loan application?

Core documents are passport/ID card, proof of income such as pay slips and tax returns of the past three years, bank account statements, confirmation letter from employer, and proof of a Spanish bank account.

How does one obtain the NIE number?

The NIE must be applied for in person at the respective Spanish consular representation. Alternatively, an authorized person can submit the application at a police station on site in Spain.

Does the bank account need to be with the financing institution?

No, your bank account can be maintained elsewhere. However, many Spanish banks offer interest discounts and other benefits when bundling mortgage loan and account with them.

Conclusion: No Problem with the Right Approach

Although bureaucratic hurdles exist – with proper preparation, diligent application, and some patience, it is definitely possible for Germans to obtain financing for purchasing real estate in Spain without issues.

Chances are good if as an applicant you have secured Euro income, spotless credit history, and ideally hold a permanent employment contract.

Comparing offers from multiple banks is also key, as conditions between Spanish institutions vary significantly. Real estate and finance professionals can greatly streamline the entire process.

Be sure to inform yourself thoroughly on all requirements in advance and budget ample time for document preparation and the overall financing process.

Then nothing stands in the way of your dream home on Spain's sunny shores anymore! ¡Buena suerte!

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