Are Spanish Mortgages more expensive for Foreigners

A recent article in the Telegraph about Retirees coming back to Spain to snap up cut price property also covered a number of issues surrounding Spanish Mortgages.

The suggestion was that non residents buying in Spain who take a mortgage can expect to pay up to double the rate a Spanish resident would pay.

Is this true

It is only true in the case where the resident is buying their main home. For a second home or for investment a Spanish resident, as in most countries, can expect pay much higher rates when contracting a loan.

For Foreign buyers who are not working in Spain and in the tax system the property in Spain is treated not as a main residence so rates are higher. This is the case even if the purchase is to be the main home. To achieve lower rates the buyer must first put themselves into the tax system and be a full Spanish resident.

For non nationals buying in the UK, where mortgages are available, which is few and far between, rates are higher to reflect the extra deemed risk. The same is true for Spanish Banks who lend freely but see non residents buying a holiday home as a higher risk than a resident who is buying a home to live in.

Are non resident mortgage rates double resident rates

With the current improvements we have seen over the last few weeks the average rate residents will pay is not half of what a foreigner will pay. Yes the headlines talk of 1.25% above Euribor but to achieve this rate the Spanish applicant will have to have a low loan to value, a private pension with the Bank along with payment protection, life cover and buildings and contents insurance, and have their nomina paid into the account each month.

Best rates for a non resident currently is 2% above Euribor with life cover, contents insurance and a Bank account as compulsory.

Should I contract a Spanish Mortgage or borrow at home

There is no one right solution for everybody. For some people buying in Spain releasing funds secured against a UK home will be the best solution and for others a Spanish Mortgage may provide a better route. Taking professional and experienced advice from someone who understands both markets and can outline the pors and cons of each is probably the best first step in making the right desicion for your circumstances. 

Read the full article : Foreigners pay higher rates