Mortgage in Spain for UK citizens: everything you need to know

Considering a fresh start in a place with warm and sunny weather? Spain could be the ideal location for buying a property. UK citizens form an expat community of over 290,000 residents, so this should make your adjustment easier. 

This guide will provide all the essential information about obtaining a mortgage in Spain from the UK, including the best Spanish mortgages available for UK buyers, the application process, and tax implications. 

We'll also introduce you to Homevest, a service that assists you in receiving mortgage offers from top banks in Spain directly from abroad.

But first, let's delve into some fundamental details you should know before applying for a mortgage. 

What are the rules for UK citizens buying property in Spain after Brexit?

While the UK's exit from the EU has brought about changes, UK citizens can still buy properties in Spain and obtain mortgage loans, much like before.

To ensure a smooth transaction, it's vital to meet the bank's criteria and showcase a solid financial standing for loan repayments.

However, post-Brexit, British nationals should be aware of two significant shifts:

• their stay in Spain is now limited to 90 days without a visa
• opting to rent out their property in Spain may attract higher taxes than those imposed on EU residents

What deposit do you have to pay to buy a house in Spain from the UK?

You'll need to provide a 30% deposit of the property value. 

Most Spanish banks offer financing up to 70% for non-residents, regardless of whether they are from the UK, US, or EU. 

Continue reading to explore insights on the deposit amounts and considerations when purchasing a property in Spain as a UK resident. 

What Spanish mortgages are available for UK buyers?

UK citizens looking to obtain a mortgage based on incomes earned in GBP have options with banks such as Sabadell, Santander, Caixabank, Cajasur, and Bankinter.

Each bank offers unique benefits for different financial situations:

• Cajasur is an excellent choice for those purchasing property in Malaga, Marbella, or any city on the Costa del Sol
• CaixaBank provides appealing fixed-term offers for those wanting peace of mind amid fluctuating interest rates
• Santander is a good fit for properties valued at less than 100,000 EUR
• Sabadell offers great flexibility and the best competitive offers
• Bankinter is ideal for UK buyers with a monthly income of at least 2,500 EUR, especially those leaning towards a variable mortgage

Keep reading to learn more about the best Spanish mortgage banks for UK buyers.

How do you apply for a Spanish mortgage from the UK?

The first step is to explore Spanish lenders that serve foreigners. 

As you sift through your options, weigh the interest rates, fees, and the total cost of the mortgage. 

NIE application requirements 

Before beginning the process, remember that you must have an NIE to purchase a property or secure a mortgage in Spain. 

The NIE is a Foreign Identification Number you can obtain from the Spanish consulate in the UK. Prepare the necessary documents, pay the associated fee, and you should receive your NIE within a few weeks.

Spanish bank account

You'll need a Spanish bank account when buying a house in Spain. 

Having a local account makes everything smoother and gives you better options.

Before deciding what Spanish bank account is suitable, learn about the requirements, compare costs, and explore accounts for non-residents.

Mortgage application process 

Here are a few steps you need to take in your mortgage application process: 

1. Prepare your documents. Make sure you have all essential papers like a passport, proof of income, P60 tax form, and bank details.

Homevest offers a time-saving solution with its self-service platform. This digital service consolidates your credit file in one location, enabling you to apply to multiple banks simultaneously. 

Once you've uploaded all the mortgage documents onto the platform, you can request and compare mortgage offers from banks. 

2. Obtain pre-approval. See how much the bank might be willing to lend you. It's a preliminary check, so it doesn't guarantee the loan.

3. Value the property. While banks might offer survey services, often free or paid, an independent appraisal gives a fairer valuation and increases the odds of matching your purchase price.

4. Official application. Once you've chosen a property, fill out the detailed mortgage application. The bank will review everything thoroughly. If it all checks out, they'll make an offer.

5. Legalities. Get a notary and legal advice to ensure all paperwork is in order. 

6. Close the deal. There will be a final meeting to sign the mortgage and cover any fees. After that, the bank pays the seller, and you'll officially own the property.

What are the tax implications of buying property in Spain?

UK citizens must consider property taxes and mortgage expenses to understand their overall property budget better.

Taxes for resale properties

For resale properties, the main tax is the Property Transfer Tax (ITP), which varies by region and can range from 6% to 11% of the property's price. 

It's important to note that the Property Transfer Tax for second-hand properties in the Canary Islands is set at 6.5%. If you're unsure whether investing in a holiday home is worthwhile, comparing prices and exploring top holiday spots can help you make a decision.

Taxes for new properties

When purchasing new properties, buyers are responsible for Value Added Tax (IVA), typically at 10% of the purchase price, and Stamp Duty (AJD), which varies by region but is usually between 0.5% and 2%.

What other taxes should you consider?

• Notary costs, which range from 0.5% to 1% of the property's price
• Mortgage fees, which can include application, valuation, and arrangement fees
• Gestoría and bank fees that cover administrative tasks and bank-related costs
• Land registry fees, ranging from 0.5% to 1%

For an overall picture, read a guide about the taxes you need to pay when buying a property to avoid surprises along the way.

Frequently asked questions

Can I live in Spain permanently if I buy a property?

Buying property in Spain does not automatically grant you the right to live in Spain permanently especially if you are a UK citizen. 

As of April 2024, Spain has ceased its Golden Visa program for new applicants, meaning you will not qualify for residency by investing in a property worth 500,000 EUR.

How can British second homeowners spend more than 90 days in Spain after Brexit?

If you can prove you have enough money to live in Spain without working, you might qualify for a non-lucrative visa. This visa allows you to stay without working and can be extended.

It's worth noting that British citizens may soon be able to extend the duration of their stay, as the Spanish government has advocated for the removal of the post-Brexit 90-day limit in EU countries. 

Can you retire in Spain from the UK after Brexit?

Yes, it is possible to retire in Spain even though the UK is no longer part of the EU. You'll need to address several important considerations, including securing health insurance, before making this move. It's worth mentioning you have the option to transfer your pension from the UK to Spain. Continue reading to learn everything about retiring in Spain, including details on purchasing property here.

Navigating the mortgage process in Spain as a UK citizen can seem daunting, we know. 

To help you recap the essential points and ensure you're well-prepared for this journey, here are the key takeaways from our guide:

#1. Efficiency with Homevest. Begin your mortgage journey with a swift application process through Homevest, streamlining your interactions with multiple banks and ensuring you get competitive mortgage offers. 

#2. Negotiation is key. Engage in negotiations with banks to secure the most favorable mortgage offers.

#3. Detailed application. The official application requires thorough details for the bank's review.

#4. Risk evaluation. Banks will assess the risk associated with your mortgage application, determining loan terms and interest rates.

#5. Property valuation. Ensure you get an unbiased property survey, which can significantly influence your mortgage terms.

#6. Formal offer. Once approved, you'll receive a formal offer from the bank, which you'll need to review and sign.

#7. Gestoria process. This administrative process is crucial in Spain, helping with various bureaucratic tasks related to your mortgage.

#8. FEIN acquisition. After its acceptance, clients have a mandatory reflection period before the mortgage process advances.

#9. Legal finalization. The process concludes with a notary signing, making you the official owner of the property.

Sources used and checked in April 2024:

1. UK residents in Spain
2. Buying property in Spain from the UK
3. 180 day Brexit rule

We recommend obtaining professional or specialist advice before taking or refraining from any action based on the content in this article. The information in this article does not constitute legal, tax, or other professional advice from Homevest Limited. Prior results do not guarantee a similar outcome. We make no representations, warranties, or guarantees, whether express or implied, that the content in this article is accurate, complete, or up to date.