Are you looking to get a mortgage in Spain as a self-employed ex-pat? Then read on and find out how we got our mortgage approved in less than a month!
First of all, I want to be clear that this post is based on our personal experience. This post is intended as a guide and insight on how we went through obtaining a mortgage in Spain. If you’re contemplating of making the move to Valencia, I would suggest reading my post on ‘So You’re Thinking About Living In Valencia, Spain?‘ and ‘Realities Of Being A British Family In Valencia’. This will give you a little insight into our experiences in the early days, and how we have come to where we are now.
Our Work Background
My husband and I both work in the design and development business. We have a registered company in the UK and have self-employed or “Autonomo” status here in Spain. We were lucky to have the freedom to be able to work and live wherever we want, as long as we had a good internet connection! Therefore that’s one of the reasons we moved to Valencia.
Moving To Valencia
We moved to Valencia in late 2012. Back then we opted to rent a property for at least 3 years. Not wanting to commit to anything permanent before trying out the lifestyle here was our initial plan. If we decided it wasn’t for us, or it was too hard adapting for the children, then we’d go back and resume life in the UK.
Our first home was a ‘try out’, but after 3 years we decided that living in the campo was not for us. With children at school age, we wanted somewhere more convenient.
Choosing The Right Home To Buy
We moved into our current house back in 2016, situated in a small urbanization with its own bar/restaurant, sports facilities, friendly neighbours and importantly fast internet!
The house is located inside an urbanisation, which meant that they have facilities for us to use all year round. It is also very near the school and only a stone’s throw away from shopping, transport links and all the usual amenities. You can read about ‘What It’s Like To Live In An Urbanisation In Valencia’ to give you an insight into living in this type of area.
Rent to Buy ‘Alquiler con Opción Comprá’
With the ‘rent to buy’ option, you rent the house as normal. In our case, we signed a contract for three years. After the three years, we then have the option to buy the property if we wish. The great thing about this type of leasing; is that the rent paid is deducted from the total sale value of the house. We also have the freedom to change our mind. Just in case our circumstances change or we decide that the house is not for us. In simple words, we try it before we buy it!
A Rent To Buy Option allowed us the flexibility to save. We are also under no obligation to buy the property once the rental period ends. The only downside of this is that if we decide that the house was not for us then we will lose any money that we have put into it. Typically as we did, you will pay more than what you would if you were simply renting. In our case, each year there was a €5000 downpayment. This is what makes the system so attractive to the landlord as well as serious potential buyers.
Applying For A Mortgage Through A Bank
Three years have certainly come around quicker than we expected. After saving enough money for our deposit and fees, we approached our first bank Banco Mediolanum. They offered a low-interest rate of 1,10% and it seemed like a good place to start with an incredibly competitive rate.
Our first meeting with them didn’t go too well. Though we had all the paperwork and our financial records ready for them, as soon as they realised our Spanish status was ‘Autonomo’, and not in full-time employment, then they would only be able to offer a loan of 70% of the mortgage price (LTV). We were looking for at least 80% LTV, or Loan To Value. This became apparent that many banks only offer a maximum of 70% to Autonomo’s due to the increased risk.
All our regular banking to date had been with La Caixa. Unfortunately, their mortgage interest rates were not competitive enough and pretty high. Just along the road from our branch though is another bank, Bankia. With their window displays, it was clear they were offering very attractive deals so we called in one morning and began discussions. Our local branch was friendly enough and despite the language gap. We upheld discussions, and they helped us with any questions that we may have.
From the initial conversations with the branch manager, it looked as though there would be no problems and the process would be handled quickly. So at this stage, things were looking very promising.
We opened an account during the initial meeting which was all we needed. There was no long list of ‘vinculaciones’ (conditions), as are common with other lenders in Spain. The only Vinculacion was that we had an account into which we’d pay our monthly salary.
Bumps Along The Way
Two weeks passed since we applied for a mortgage with Bankia and the bank had still not approved our mortgage application. It seemed every day we’d be instructed to try something new. Open a pension account, perform some transfers to build a transaction history, pay for a regular expense such as the electricity or water bill.
This was going on and on and still no approval. This was a very frustrating phase. Despite discussing our finances/business in the UK, the bank was not interested in knowing any of the financial details so only based the application on figures from our Spanish work and banking history.
This seemed ludicrous as it doesn’t truly reflect our status. I also read EU regulations were supposedly in place to ensure banks DO look at an applicant’s global state of finances, not just domestic. My confidence in Bankia was rapidly diminishing.
Applying Through Mortgage Broker In Valencia
After three weeks we were still not getting anywhere with Bankia, so we decided to try a different avenue. We did some further research into mortgage brokers in Spain who have experience dealing with ex-pats, and many have recommended the services of Mortgage Direct SL.
Using a mortgage broker was not one of our options when we started thinking about buying our home. However, after a few unsuccessful attempts with several banks, we thought we’d give it a try. After reading positive reviews about Mortgage Direct SL we got in touch with them.
Our initial contact was with Bozena, and she gave us some advice on our situation and provided us with a short form to fill in so that they could assess our eligibility. She also clearly explained how their process works and that she is confident that she will be able to help us. Additionally, she explained why the Banks were having difficulties providing us with answers and seemed more clued up, than the banks themselves.
Steps To The Mortgage Process In Spain
Mortgage Request Application
Once Bozena had a full overview of our case we began to fill in our official application. We were sent a list of paperwork that we needed to complete as well as a list of documents that we must provide. These included tax assessment forms, bank accounts (the UK and Spain), credit score file (UK). As we own a company in the UK, it was important to also provide documentation and status of earnings. Bozena was very clear about the documents that we needed to provide. This made the initial process smoother as it prevented confusion and delays.
We were introduced to other members of staff at the broker who would be assisting in our application. Having a checklist to work from with a formal set of steps is much more productive and more in line with the way we’re used to working. Rather than our experience directly with the Spanish Banks which amounted largely to waiting around to ‘see if this works’, or ‘Vemos a ver’ without any clear or formal instructions.
Within a day or two we’d provided the broker with all the details they needed. They worked late into Friday night to ensure the application was then sent on to the Bank they had in mind before the weekend had chance to pass. Any emails sent to them were answered quickly, regardless of the time of day or night I sent them.
Our Mortgage Offer
It’s amazing how only 2 weeks from our initial application our mortgage has been approved! There were no documents to translate. They looked at all our financial records, the UK and Spain and everything went very smoothly. Bozena and her team are very responsive. Nothing like the slow process that they take if you were to go to a Spanish bank!
There were daily updates and any questions that we have are answered promptly. At this stage, we’d now been introduced to the contact at the Bank who would be handling matters from here on. This was not a high street bank but specialists in dealing with foreign lending and our contact were in English so this made things super easy.
The obligations of the bank were to provide us with an offer which they did, necessary paperwork and if we were happy to proceed, there would be a statutory ‘cooling-off’ period of 10 days which gives us, the borrower chance to review the offer, ensure we fully understand our obligations and the opportunity to change our mind or re-negotiate if required.
Home Valuation / Tasación
Once our mortgage had been pre-approved it’s a requirement that we have a home valuation. An appointment was made with an independent evaluator who came to our home and conducted all the necessary checks. The process of checking and finally receiving our tasación took around one week. We were then told the market value of our home according to these checks.
It is obligatory in Spain to have home insurance to cover the value of the property. Life insurance is not a necessity. But most banks will encourage you to obtain insurance as they see it as a plus in the mortgage application. Banks like LaCaixa will adjust the interest rate they offer you, the more arrangements such as home insurance, life insurance etc, you take with them.
Home Energy Efficient Checks
The last check of the process. A verified home energy evaluation may be arranged to check the efficiency of your home. This was paid for by the Seller and was not our responsibility to arrange. You will be given a copy of their report which includes recommendations for how the efficiency of your home can be improved.
Appointment With The Notary (before signing the contract)
There is an association of Notaries in Spain known as the Notariado. The bank will contact them and you will receive an email or SMS message with instructions to arrange the meeting with the Notary and all parties to complete the mortgage application and sale of the property.
This is a simple process. Simply follow the instructions and you get to choose the Notary online. In our case, we picked the closest one in our local town. Once confirmed, they will soon be in touch to confirm a date that everyone is happy with.
Before the signing, you will also be requested to visit the Notary alone for an official ‘interview’. This sounds more daunting than it actually is. This is a legal obligation of the Notary to ensure you fully understand the conditions and details of the mortgage.
They explain everything in detail and give you a short form to answer. This is to ensure you understand what you are letting yourself in for.
- Do you know what happens if you missed a payment
- Do you know exactly the interest you’ll be paying back, for how long etc. etc.
This process also gives you the opportunity to meet with the Notary before the official signing.
Final Appointment With The Notary (for the final signing with the vendors)
After a week or so, we were given an appointment date to sign the contract. Also present will be representatives from the Bank, the seller, yourselves the buyer, and of course Notary staff. After the mortgage value and remaining monies to be the seller will be presented at this point.
This should be in the form of a bank cheque, which is simple to obtain. You simply need to ask your bank ahead of time and they will write you an official cheque. The lending bank will have informed you the full details anyway. What they will lend you, the deposits to pay if anything and how much you would need to bring with you to the Notary.
With all present in the Notary office, he or she will once again read aloud the conditions of the mortgage, a copy of the new deeds in your name (Copia Simple) will be presented to you and this marks the beginning of your new life as a homeowner.
You might see low-interest rates on display in bank windows and on online comparison sites which tempt you to handle the process alone and save on the costs of utilising a mortgage broker. We certainly did at first. But it quickly became apparent that no bank is going to go out of there way to ensure you get the best service, keep you regularly informed, and find you the best rates according to your ‘Global’ financial situation.
It simply seems they don’t have the staff or knowledge to investigate foreign affairs in depth. So although you may be reluctant to fork out extra money for what you think can be done yourself, I hope this article has shown you the peace of mind. The quality service and the unique offers that only a broker with their network and pre-existing relationships with banks and lenders can offer you is worth every cent.
To get your FREE no-obligation advice, get in touch with Mortgage Direct S.L. They are friendly and will go the extra mile to ensure your mortgage application in Spain goes smoothly with the best rate.
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Thanks a lot for taking the time to share your experience. We are planning our move and our situation is very similar. We didn’t know about this “Rent to Buy” option, although I checked now and there are very few results. And the tips related to the bank loan are also very useful.
Hi Cristina, thanks for taking the time to comment. I agree there is not much ‘Rent to Buy’ homes available here in Spain, but you can find them from time to time. Maybe its worth asking too if they would consider this option. We have rented a couple of places in the early days, and the owners gave us the rent-to-buy option after a couple of years, so this is can be a possibility too. 🙂