Mortgages in Spain

What is a mortgage?

A mortgage is a loan secured on your property. Its main characteristic is that as well as the personal guarantee, the property acts as a guarantee for the repayment of the loan. Hence the reason why for mortgage loans you get lower interest rates than with other kind of loans.
The term for repayment can be agreed between parties (borrower and bank) depending on the amount of the transaction. The bank stipulates the maximum age limit for a mortgage loan is 65 years. Interest rate: There is a vast range of interest rates, these depend on whether you choose fixed, variable or mixed interest rates. An Important issue is house and contents insurance, when taking out a mortgage the lender obliges the borrower to cover the property with a household insurance. This is a legal requirement.

How much to be borrow?
Two different aspects have to be considered in order to know the right amount of the loan:

	Value of the property: A reputable valuation company will give you the necessary information with regards to the value of the property and if the amount requested by the seller is the real market value. The purchaser must always bear in mind that costs derived from having the surveyors valuation are payable whether or not the loan is granted.
	Purchasers income: Lenders recommendation: Monthly repayments will not exceed a certain percentage of your monthly income:
	Town Water: 30 to 35%.................................for residents in Spain. 20 to 25%.........................................for non- residents.

Types of mortgages
Fixed interest rate loans. The advantage of this loan is that the monthly repayment amount is not affected whether the rates increase or decrease, therefore, the borrower will always pay the same monthly amount. So, the fixed interest rate may be higher than the variable interest rate the day you sign for your mortgage, but from then on, no matter how much the interest of the Bank of Spain varies, your rate will remain fixed.
Variable interest rate loans. The monthly repayment instalment is affected by the interest rate change of the market. Advantages: longer repayment periods (up to 20 or 30 years), the commission for earlier repayments does not go beyond 1%.

The monthly repayments depend on the following:

The amount of the loan applied for.
The interest rate agreed.
The period agreed.

Documentation
Personal information. Identity card or N.I.E. (Fiscal identification number).
Financial information. The lender will ask you to verify your ability to repay the loan instalments with a certificate that indicates your income or financial situation.

1. If employed:
	Last three payslips.
	Last tax return (P60)
	Last three statements of your bank account.
	Statement of current assets and liabilities.
	Bank reference: including contact numbers, name of the manager and account number.
	Letter from employer stating the length of the contract and salary.
2. If self employed:
	Profit and loss accounts signed off by a Chartered Accountant.
	Copy of your tax return.
	Last three statements of your bank account.
	Bank Reference: including contact numbers, name of the manager and account number.
	Statement of current assets and liabilities.