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top five mortgages in Spain

Top 5 Mortgages currently available on the Costa del Sol

With the Euribor still in negative territory and interest rates in Spain close to their lowest ever, mortgages have never been cheaper. But as with all financial products, interest rates, monthly repayments, and conditions vary hugely from bank to bank, so it’s essential to shop around before you commit to a loan. To help you get an idea of what sort of products are on the market, read on to discover the top five mortgages currently available on the Costa del Sol.

top five mortgages in Spain

Sourcing the best mortgages for your property on the Costa del Sol

A mortgage is often an essential requirement for Costa del Sol property, especially if you’re a first-time buyer and/or only have a small deposit. Although lending regulations have tightened up since the 2008 property crash and buyers can no longer source 100% loan-to-value (LTV) mortgages, there’s still plenty of competition for your business. It, therefore, pays to consult several banks to compare and contrast mortgage costs and conditions. Make sure you’re comparing like with like (i.e. same LTV and mortgage term). You may want to use the services of a mortgage broker on the Costa del Sol – these professionals have the advantage of knowing the market and ready access to multiple options.

Top tip – start planning your financing well in advance of your purchase so that you have pre-approval for a mortgage loan when you find a property you want to buy.

top five mortgages in Spain

Types of mortgages available

Buyers of property on the Costa del Sol have access to a wide range of mortgage products, from both Spanish and international banks. Broadly speaking, they include:

Variable-rate mortgages

Approximately half of all home loans in Spain have a variable interest rate. The advantage of this type of mortgage is that you can tap into low rates and therefore benefit from cheaper monthly repayments. On the other hand, you cannot predict future rates and may find your repayments rise.

Fixed-rate mortgages

An increasingly popular option in Spain at the moment, home loans with fixed interest rates offer the advantage of the same monthly repayment throughout the term of the loan. There’s also more variety for shorter mortgage terms (less than ten years). However, you can never benefit from interest lower than your fixed rate.

Combination mortgages

Some banks offer loans that mix variable and fixed interest rates. They typically begin with a fixed rate and then switch to a variable after two years. These home loans offer the benefits and drawbacks of both mortgage types.

Interest-only mortgages

This type of mortgage on the Costa del Sol tends to be available for residents only and has the advantage of lower monthly repayments. But, an interest-only loan is more expensive in the long term because you take longer to pay off the capital.

Non-resident mortgages

If you aren’t resident in Spain and want to buy property on the Costa del Sol, mortgage products are available. LTV tends to be lower (50% to 60%), and the loan term is generally shorter (typically a maximum of 25 years). This is because banks consider loans for second homes to be higher risk.

Mortgages in other currencies

You can also take out a mortgage on the Costa del Sol in a currency other than euros, and many banks have loan products for the market. However, this type of mortgage is considered high risk by financial experts who generally recommend that your property and mortgage loan are in the same currency to minimise currency exchange fluctuations.

Did you know? Spanish banks use the Euribor (set by the European Central Bank) as the base for their mortgage interest rates. In early July 2020, the Euribor stood at -0.252%.

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Latest statistics for mortgages in Spain

The most recent figures for home loans in Spain (April 2020) show an increase in the number of fixed-interest mortgages and almost rock-bottom interest rates.

• The average interest rate for all mortgages: 2.48%
• The average interest rate for fixed-rate mortgages: 2.86%
• The average interest rate for variable-rate mortgages: 2.13%
• 51.6% of new mortgages in Spain in April were for fixed-rate loans.
• The average length of a loan: 24 years.

Source: INE, 26 June 2020 https://www.ine.es/daco/daco42/daco426/h0420.pdf  

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Requirements for mortgages on the Costa del Sol

As is the case in most countries, Spanish banks require loan applicants to fulfil a series of conditions and supply plenty of paperwork. The required documentation varies depending on whether you are tax resident in Spain or not.

The maximum loan can be as high as 90% for principal home loans (although 80% is much more common) and for up to 30 years. Mortgages for holiday and investment homes usually go no higher than 60% LTV, and you’ll find it challenging to get a loan for longer than 25 years. Some banks do not lend to buyers over 60.

Top tip – prepare your paperwork and get your documentation in order well in advance. Translations and validations take time.

Paperwork

Employed applicants are usually required to submit: salary slips for the last six months, the latest annual tax declaration and six months of bank statements.

Retirees need to provide: their latest annual tax declaration and six months of bank statements.

Self-employed individuals must show the bank: their latest annual tax declaration, their accounts and 12 months of bank statements.

You should also provide proof of any other loans you have, including mortgages. And if you are not resident or have recently arrived on the Costa del Sol, you will need to provide proof of your credit record such as the report issued by companies like Experian.

Commitments

As the old adage goes, there’s no such thing as a free meal, and even the best mortgage deals on the Costa del Sol put some sort of obligation on the applicant. The range and extent of commitment varies from bank to bank (and sometimes from loan to loan within the same entity). You can typically expect the following:

• To have to open a bank account and pay your monthly salary into it.
• To take out insurance, usually home but sometimes life as well.
• To take out a pension plan.
• To contract a credit card, generally with a minimum annual spend.

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Mortgage costs

Home loans incur several costs, and you should budget for these on top of the 10-12% expenses involved in buying property on the Costa del Sol. Expect some or all of the following costs:

Valuation costs – in recent years, banks tend to pay for this.
Mortgage fee – banks charge you for setting up the loan and fees range from 0.5% to 2% of the amount borrowed.
Stamp duty – known as AJD in Spanish, it is levied at 1.5% of the mortgage loan and paid by you.
Notary and land registry fees – banks are now more open to paying for these so negotiate this into your contract.

Top tip – read (and reread) the small print for your mortgage on the Costa del Sol. Look especially carefully at the clauses for early repayment (banks typically charge 2% fees on these during the first years of the loan); the so-called cláusula suelo (floor clause) that binds you a minimum interest rate; and who pays which fees. Check our article about the New Spanish Mortgage Law

Read more about the costs involved when you buy property on the Costa del Sol.

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Best mortgage deals in Malaga

To source the best mortgage loans on the Costa del Sol, we have created a first-time buyer persona. We have presumed that the buyers are a couple, tax resident in Spain, aged 35-40 with a combined annual income of €70,000 and a deposit of €30,000 to €40,000.

To find the best loans, we used a well-known comparison site. In July 2020, the best offers available for mortgages from Spanish banks were the following:

Best variable-interest mortgages on the Costa del Sol

TARGO BANK – variable interest rate of 1.10% for the first year and then Euribor +0.95%. Loans are available for up to 90% LTV for between 10 and 30 years. Extra monthly costs include around €20 in life and home insurance.

OPEN BANK – variable interest rate of 1.11% for the first year and then Euribor +0.99%. Loans are available for up to 80% LTV for between 5 and 30 years. Extra monthly costs include around €12 in home insurance.

COINC – variable interest rate of 2.14% for the first year and then Euribor +1.10%. Loans are available for up to 80% LTV for between 3 and 30 years.

Best fixed-interest mortgages on the Costa del Sol

TARGO BANK – fixed interest rate of 1.82%. Loans are available for up to 90% LTV for up to 30 years. Extra monthly costs include around €20 in life and home insurance.

CAJASUR – fixed interest rate of 1.88%. Loans are available for up to 80% LTV for between 10 and 30 years. Extra monthly costs include around €19 in insurance.

best mortgage in Spain

Your next step

Your real estate agent usually has access to information on mortgage loans on the Costa del Sol and may be able to recommend a broker. At The Property Agent, we have been helping people find homes that move them for over 15 years and have expert knowledge of the local market and a network of contacts within the best Spanish banks. Contact me now for advice on the best property and mortgage for you.

What my clients say...

Since the first moment, Celeste was very professional!! The best ever Real Estate Agent I've met so far! The information provided was very personalized and extended to meet our requirements! The best! Joaquim Soares from Portugal

Celeste is a very professional Real Estate Agent. She knows the area extremely well and is therefore very capable of showing the right properties. She is very customer-focused, friendly and goes the extra mile to keep her clients happy. We are very happy with her help and would recommend her to all who are looking for real estate in the area! Saida & Hachim from the Netherlands

We had desires to invest in Spain, but the distance has slowed us down. For several months, we were in contact with several real estate agents. The one that gave us the most confidence is The Property Agent owned by Mrs Celeste Alonso. We met an exceptional person through the internet following our research, and I must tell you that we are delighted! This beautiful meeting was decisive; it is a person who proves the real qualities of professionalism. She took charge of us from beginning to end. Arrived in Spain in Malaga, she accompanied us for visits to different apartments, and we found a rare pearl thanks to Celeste.  Mr and Mrs Catteau from France

Celeste is the reason we bought our property. Her knowledge of the market and her ability to find gems in the residential real estate sector are second to none. Time and again, she has proven to be reliable and extremely trustworthy. She provided us with immeasurable support during the purchase of our property and, most importantly, while we were decorating and renovating our apartment. Celeste’s network of contacts has been invaluable to us and were key enablers in ensuring a smooth purchase and world-class after-sales care. If you are looking to rent or buy a property, we consider Celeste to be the best at what she does. Don’t settle for anyone else! Five stars! PS: Our dog loves her too! Marzia & Satya from Italy

We decided to work with Celeste from our first conversation by telephone. We liked her approach and very good care of customers. Celeste supported us not only before and during the purchase, but also after the purchase was successfully completed. Celeste really helped us a lot. We are happy that in Spain we have a great friend of ours! Be sure that we will recommend Celeste like the best Real Estate Agent in Spain. Dana & Andrew from Poland

Jo and I would like to thank Celeste for the very professional service that she gave us when we decided to move from France to La Alcaidesa. She was spot on in understanding our requirements and, when we found the right property,  she ensured that the whole conveyancing process went through very smoothly and quickly. But what impressed us was that, after we moved in, Celeste ensured that we discovered all the local services in the area. This was our 5th house move and we can honestly say that she helped to make this the easiest. Mike & Jo from the UK    

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