How Much Money Is Actually Needed to Purchase a Property in Spain?

• It is still difficult to get a mortgage in Spain these days
• A 70% mortgage or less is generally the norm
• Ten percent of the value of the property is needed for tax and legal fees
• This is in addition to how much the bank does not finance

Many people consider that now is the right time to purchase a property with house prices at an all-time low, but how much money is actually needed when buying a home?

House prices

House prices in Spain have fallen almost 40% since the boom in 2007, yet experts in the real-estate sector still forecast a further 5% decrease in prices before they actually reach rock bottom.

Some people may prefer to wait a little longer before they make their purchase, but for those that want to buy, there are certain considerations that must be made before doing so.

Can I get a mortgage?

Although house prices are low at present, it has become almost impossible for a bank to grant a mortgage, and very few banks are doing so. If they do, conditions are not always so advantageous for the buyer.

How much are banks lending?

Unless you are purchasing one of the bank’s properties from their books (repossessions and embargoed properties), you will be awarded, at the very most 80%, whereas a 70% mortgage is more likely.

How much extra will I require?

In this case, you will still require 30-40% of the value of the property in savings (if granted 70%) – 40,000 euro for every 100,000 euro of value.

Ten percent of this amount is destined to paperwork fees at the notary or lawyers and taxes. The other 30% will be used as a deposit or preliminary down payment before the full amount must be settled when signing over the title deeds at the bank or notary’s office.

What about 100% mortgages?

It is possible to be awarded a 100% loan from the bank. However, the general stipulation is that you must purchase one of the properties from their catalogue of repossessions and embargoed properties.

While the advantages of a 100% mortgage are evident, especially to those with limited savings, one does also have to consider the disadvantages of this proposal.

Advantages of a 100% bank loan

• Great for those without much savings
• Mortgage payments are more flexible – it is possible to miss one month and pay it later
• Mortgages can be paid back over a longer period – up to 40 years, which will reduce monthly payments
• It is possible to reduce the type of interest
• Valuation fees are paid by the bank

Disadvantages of a 100% mortgage loan

• Limited to the choice of properties
• Embargoed or repossessed properties could have been left in a poor state
• Still require 10% of the total value for legal costs and taxes
• Banks have returned to including the “cláusula suelo” when the interest rate cannot fall below a certain level
• Interest rates are generally higher

Which bank to choose?

At present, Banco de Valencia, SabadellCAM and Novagalicia are offering very competitive mortgages, whilst BBVA has very high interest rates.

Sources: www.20minutos.es, www.finanzas.com, www.lapoliza.com