Mortgages in Barcelona Spain

Despite this post being written for Barcelona it covers the logic applied in all Spain.
And I’ll be covering this aspects:

• How much they cover? (loan to value)
• Years to pay off mortgage (loan term)
• Interest rates for mortgages in Barcelona
• Can mortgage cover renovation costs?
• Mortgage with other currencies
• Mortgage payments with foreign bank account
• How much saving do I need? (example)
• How to avoid vinculated products
• What’s the mortgage process?
• Other important issues

May you don’t know us yet, let’s have a quick introduction: we’re ERA architects.
Actually, I’m Esther Rovira, architect and passive house designer in Barcelona and Catalonia for either passive houses, efficient houses and positive houses.
In this post ‘Mortgages in Barcelona Spain’, you’ll find the list of basics you need to know before you start your renovation in Barcelona.
I hope it helps you! Let’s explore the 4 basics of a positive home renovation.

How much they cover?

The loan to value ratio (LTV) can be up to 80% depending on 4 aspects:

• Property use

Either primary home, second home or buy to rent (last two maximum 70% LTV)

• Residency

Resident or non-resident (maximum 70% for the last one)

• Income type

Employee contract, freelancer, savings, properties…  

• Debts

Debts can be a hassle 

Years to pay off a mortgage in Barcelona?

The loan terms are maximum 30 years, however it varies with your age.

Interest rates for mortgages in Barcelona

Expect rates starting at 3% onwards.

Can mortgage cover renovation cost?

If you’re thinking of buying to renovate, most banks won’t let you enough money to cover the renovation.
However there are some mortgage companies (not banks) that can cover the renovation costs. Our mortgage lender company is able to cover up to 30% of the property value to dedicate it to the renovation.

Mortgage with other currencies

Most banks in Spain are reluctant to work with different currencies. Only some mortgage companies are able to deliver mortgages with any type of currency. 

Mortgage payments in a foreign bank account

Most banks in Spain force you to have a Spanish bank in order to deal with the monthly payment of your mortgage. Just a few mortgage companies are able to manage mortgage monthly payments within a foreign bank account. 

How much savings do I need for a mortgage?

Before I answer this question, let’s talk about the side costs and taxes when dealing with buying a property.
Expect to pay 10% of the purchase price in terms of taxes (‘Impuesto de transmisiones patrimoniales’). Also an extra 2.500€ onwards in terms of paperwork (‘escritura’, ‘registro propiedad’ and notary services).
In case you buy to renovate, the mortgage will cover the purchase and your renovation. The renovation will need to be up to 30% of the purchase value. Besides this, considering non-residents, you’ll get a maximum of 70% covered by the mortgage. So here some example:

Purchase price	350,000
purchase tax (10%)	35,000
notary + register	2,500
Renovation (30% of purchase amount)	105,000
total funds	492,500
Base for mortgage calculation	455,000
Mortgage cover non-resident (70% max)	318,500
Own funds	174,000
Own funds percentage	35.33%

For an apartment purchase price of 350.000€, you can get up to 30% of this amount in terms of renovation costs, which is 105.000€. Then the mortgage would cover 70% of these two amounts. So 70% of 455.000 is 318.500€ that would cover your mortgage. Then you need to have savings for a total value of 174.000€.
This is of course assuming that you’ve been pre-approved before considering your personal profile of assets and liabilities.
Note that mortgage lenders can offer better conditions with higher savings and less salary than the opposite. Meaning worse mortgage conditions with low savings and higher salary. So the more savings the better!

How to avoid vinculated products when signing a mortgage

Most banks in Spain force you to hire vinculated products in order to sign a mortgage with them. This means you need to hire life insurance and home insurance in order to hire the mortgage (this is very common). However there are other mortgage companies that do not require this.  

What’s the process of a mortgage in Barcelona?

This is a long item that we will deliver in a separate post to define the process in terms of:

• Pre-evaluation
• Property Valuation
• Placing final offer
• Sign the ‘arras’
• The transaction

You may find all details in our other post ‘Mortgage process in Barcelona’.

Other issues you need to take into account

This is a long item that we will deliver in a separate post to define these aspects:

• Foreign exchange rates
• Legal considerations
• Tax & wealth management

You may find all details in our other post ‘Mortgage financials in Barcelona’.

How to start?

The best way to start is to get a pre-evaluation with an English speaking expert. This evaluation can be done without a specific property. We’re able to offer this pre-evaluation with our team for free. This pre-evaluation consists of 1 hour online call and once we’ve received all the required documents, we take 10 days maximum to deliver the result of the pre-evaluation and study. You can book this call here.

Conclusions

• Loan to Value Ratio (LTV):
  • Up to 80% depending on factors such as property use, residency status, income type, and existing debts (70% max for non-residents).
  • Different limits for primary homes (up to 80%), second homes, and buy-to-rent properties (maximum 70% LTV).
• Loan Terms:
  • Maximum loan terms are 30 years, but it varies based on the borrower’s age.
• Interest Rates:
  • Expect mortgage interest rates starting at 3% onwards.
• Renovation Costs:
  • Traditional banks may not cover renovation costs for property purchase.
  • Some mortgage companies, not banks, can cover up to 30% of the property value for renovations.
• Currency and Payments:
  • Most banks in Spain are reluctant to work with different currencies.
  • Limited options for managing mortgage payments in a foreign bank account; few mortgage companies provide this service.
• Savings and Costs:
  • Consider side costs and taxes when buying a property, including 10% of the purchase price in taxes.
  • Additional costs for paperwork (escritura, registro propiedad, and notary services) may amount to €2,500 or more.
  • Savings of approximately 35.33% of the total funds needed are required.
• Vinculated Products:
  • Many banks in Spain require vinculated products like life insurance and home insurance to approve a mortgage.
  • Some mortgage companies do not impose such requirements.
• Mortgage Process:
  • Detailed process steps include pre-evaluation, property valuation, placing a final offer, signing the ‘arras,’ and completing the transaction.
• Additional Considerations:
  • Separate posts cover aspects like foreign exchange rates, legal considerations, and tax and wealth management.
• Getting Started:
  • Begin with a pre-evaluation with an English-speaking expert, allowing a preliminary assessment without a specific property.
  • Our trusted partner, holding 1.5% of the market share in Spain, works with any currency, accepts payments from foreign accounts, and doesn’t mandate vinculated products.
  • The pre-evaluation consists of a 1-hour online call, and results are delivered within a maximum of 10 days upon receiving the required documents.
  • Interested individuals can book the pre-evaluation call through the provided link.

In summary, understanding the nuances of mortgages in Barcelona involves considerations of LTV ratios, interest rates, renovation costs, currency options, savings requirements, vinculated products, and a detailed mortgage process. Choosing the right partner for a pre-evaluation can streamline the initial steps towards acquiring a mortgage in Spain.

Hope this post ‘Mortgages in Barcelona Spain’ is helpful!
(leave a your questions or comments below and we’ll try answer them)

Best of luck on your positive home renovation adventure.
See you on the next post,

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