Can't qualify for a Spanish mortgage? Consider a Sociedad Patrimonial instead

Getting a mortgage in Spain can be a challenge for foreigners, especially if their income isn't in euros, as changes in currency value and strict bank rules make it a lot harder for them. 

Still, there is always an answer, and in this case, it's creating a Sociedad Patrimonial, a type of company that can help people get a mortgage, even if their income is in another currency, especially a less popular one.

Why can’t some foreigners qualify for a Spanish mortgage?

Spanish banks often hesitate to offer mortgages to foreigners whose income is in a currency outside of the euro, especially if the currency is considered volatile. 

However, stable and strong currencies like GBP, USD, NOK, and SEK are generally accepted without issues. Currency volatility means that, for lenders, there’s a higher risk of fluctuations affecting a borrower's ability to make repayments. 

Because non-euro currencies change all the time, income can suddenly be worth less when changed to euros, which affects both borrowers and lenders.

Spanish banks typically require income in euros to reduce risk. For example, someone earning in currencies like the Romanian leu or Polish złoty could face a drop in value during the mortgage term, increasing the risk of not being able to repay the loan.

What is a Sociedad Patrimonial, and why might it be a solution worth considering?

In essence, a Sociedad Patrimonial is a holding company with an emphasis on asset management, including real estate. Foreign buyers can overcome the currency barrier by turning the purchase from a personal to a company transaction.

This new status can make banks more comfortable with extending mortgages, as businesses are considered to have different, often less risky financial structures.

Banks do not have to convert the loan into the borrower's income currency. Instead, they have more options for repossession if needed. If repayment becomes difficult, the bank must convert the loan from the original currency to the debtor's income currency.

It’s possible to secure a mortgage for a property in Spain through a Sociedad Patrimonial with financial institutions like UCI or Sabadell, which can be a significant advantage for many buyers facing income currency limitations.

How to set up a Sociedad Patrimonial in Spain?

Setting up a Sociedad Patrimonial means you'll have to meet several legal requirements: 

You must incorporate a company in Spain as part of the registration process. 

This involves filing with the Mercantile Registry, designating a director, and submitting paperwork like identification documents, company bylaws, and tax forms.

Annual fees range from €2,500 to €3,000 plus VAT, with the initial setup costing around €1,500 plus VAT.  

A Sociedad Patrimonial is a fairly simple alternative for new buyers because it does not require prior tenure, unlike some other business structures.

What are the benefits of using a Sociedad Patrimonial for a mortgage in Spain?

One of the key benefits of using a Sociedad Patrimonial is the potential for higher financing—up to 60% to 70% of the property value—compared to what an individual might qualify for. 

Also, there are some tax deductions, but exact deductions are harder to predict and need to be discussed with a financial advisor.

Another benefit is that it is easier to manage properties under the company, which can help investors who want to buy several properties.

Homevest can help estimate your budget to understand your mortgage affordability. 

Knowing how much you can afford from the start makes the next steps more straightforward. You’ll be able to see a price range for your property search and prepare accordingly, even if you're planning to set up a sociedad patrimonial. 

If you need to connect with mortgage brokers, Homevest can simplify the process for you.

Is a Sociedad Patrimonial right for you?

A Sociedad Patrimonial is best for higher-income individuals, investors, or those planning to buy multiple properties. 

It provides greater financial leverage and more structured management, which can be advantageous if you look at property as an investment.

On the other hand, if you’re a small-scale buyer with a limited budget, or if you want a simpler, more direct buying process, setting up a holding company may not be worthwhile. 

The setup and ongoing costs outweigh the benefits if you’re purchasing just one property for personal use.

Sources used and checked in November 2024:

1. Registro Mercantil Central
2. Foreign currency loans, Mortgage Credit Directive
3. Sierra Abogados: Holding company
4. EUR-Lex
5. INEAF: Sociedad Patrimonial
6. My Lawyer in Spain

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.