Investing In Spain And Portugal

Spain - Mortgages

Mortgages (hipotecas)

In general it is better to try and secure a mortgage through either a Spanish lender or a UK lender with a Spanish subsidiary or branch (Sucursal). If it can be avoided, one should not borrow against a UK property since apart from being denied various tax reliefs' (particularly in respect to rental income), the loan will be in Sterling (with obvious currency fluctuation issues) and interest rates are likely to be higher. For information on potential mortgage lenders please go to the Useful Addresses Section. Apart from the above it is important to take account of some of the key differences between UK/Irish mortgages and their Spanish counterparts:

Mortgage Periods: The repayment periods are generally for 15 years or less.

Mortgage Type: Spain does not have the same array of sophisticated financial products that exist in the UK or Ireland. In fact, the vast majority of mortgages are Fixed Interest and
Capital Repayment over the agreed mortgage period.

Mortgagee Ages: A Mortgagee Ithe recipient of the loan) must generally not be more than 70 years of age at the time of the final mortgage payment.

Penalties: Early repayment of a mortgage will generally result in heavy fines and/or penalties.

Loan to Income Ratio: Generally mortgage repayments cannot constitute more than l/3rd of a person's monthly disposable income.

Maximum Borrowing to Value Ratios: Few Spanish banks will lend more than 75% of the value of a given property. In many cases, the ratio is 66% or less.

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