Tapas Forever

Helping make the dream of moving to Spain a reality

Tag: Valencia

Buying A Property In Spain: Obtaining A Mortgage

If you’re able to finance the entire purchase of a property in cash then you are ready to make your offer. But most people nowadays typically engage a bank or a lender at this point to obtain a mortgage to finance a portion of their property purchase in Spain.

The mortgage system in general here in Spain is quite a bit different than back home. Unlike in Canada where most mortgages are amortized over a longer period (such as 25 years), but are renewable every five years, most Spanish mortgages are fixed for the entire term. What that means is a person can get a mortgage here for a certain interest rate, say 2.5% interest, fixed over the entire 20 year term – that’s as close to free money as you’ll find nowadays in my opinion, without the risk of interest rates changing while you own your home.

When I first started talking to banks about getting a mortgage, I realized that with my limited Spanish and short bank history the process was likely to be a bit difficult. My own bank, BBVA, looked over all my documents and basically said they’d call me back at some point. But other than an initial indication of the offer they might be willing to extend to me, never followed up with me after I expressed interest. Shortly afterwards BBVA changed their lending rules to make it harder to non-residents to obtain a mortgage here, so I didn’t pursue that avenue any further.

Thankfully there are mortgage brokers here in Spain that can work in English and generally have good contacts at the banks. If you haven’t heard of a mortgage broker before, essentially they are experts in obtaining mortgages, and often get preferential rates since they do most of the vetting on their side and also send a lot of volume to the banks.

One difference though is that unlike in Canada, where the bank pays a finder’s fee to a mortgage broker directly (essentially making the service free for the purchaser), here in Spain you often pay the mortgage broker for their services. While the costs for a mortgage broker generally vary, in my case I was presented with an initial scenario that my broker said they would be able to get me from one of their banks. At that point I was asked to pay €495 to formally secure the mortgage, with the caveat that if they couldn’t officially obtain a mortgage that was the same or better than their initial scenario, it would be refunded. So I said sure.

When the offers came in, I initially had two different ones from two competing banks: 25 years, 2.9%, 70% down, or 20 years, 2.15%, and 60% down. As a non-resident (from a tax perspective at least, which I still am), typically the most you can obtain for a mortgage is about a 60% loan to value ratio (LTV). Residents can usually get 70-80%, but since I likely won’t be a fiscal resident for another few years, I wasn’t able to get 80%. The 70% was actually appealing, but the documentation required for that one likely involved me visiting the consulate here and authenticating some documents, which seemed like a huge hassle (with various unknowns).

As part of the mortgage broker agreement, once you choose to move forward with a mortgage, you need to pay an additional fee, in my case a final €1,000. Obviously the combined total isn’t cheap, especially when taken in the context of the overall cost of the property, but you really need to keep everything in perspective. First, I might not have even been able to obtain a mortgage on my own, which means I wouldn’t be able to even buy a property. Second, having someone handle the entire process while I was busy working was a huge relief. Third, the rates I obtained were far better than I would have been able to get on my own. I know a few friends of mine here who obtained mortgages through their banks and were given rates of around 2.9%: that difference alone, 0.75%, amounts to roughly €9,100 of interest over the life of the mortgage, so more than enough to make up for the €1,400 or so I spent.

While technically you don’t need to have a mortgage arranged before making an offer on a property, it will make the negotiation process (and subsequent closing) much easier if you do. So it’s probably a good idea to approach your bank or to engage a mortgage broker to obtain a pre-approval before you make an offer. You can certainly add a clause into the contract saying it’s dependent on you obtaining a mortgage, but to be honest it’s a bit of a bad deal for the seller since they are basically taking their property off for a month or two for your benefit alone. So many sellers will simply decline any contract with that clause in it. My advice is to make sure you can obtain a mortgage before you get that far.

If you are looking for a great mortgage broker in Spain, I highly recommend Mortgage Direct SL – they were absolutely great to work with, and obtained two pre-approval offers for me.

Once you know you are set with a mortgage, it’s time to put in the official offer. The next post in this series will deal with that, so stay tuned.

Arriving in Spain for the First Time

After I received my non-lucrative visa, I quickly finished closing up my life in Canada ( at least for a while ) and continued getting ready to head to Spain. I was debating a lot of different things at the time, one of which was whether or not I should bring an extra suitcase full of items I thought I might need in Spain, or to simply pack lighter and buy what I would need there. I chose to do the latter, mostly because I hate travelling with a lot of stuff.

When the time finally came, I boarded an airplane at Vancouver international airport and set off to London, UK, as my entry point into Europe. One of the things I read was that it’s really important to have documentation on when you arrived in Spain for the first time. Often they will look for proof of arrival when you go to fill out all the paperwork you will have to do when you arrive in Spain.

When I arrived in London, I approached the customs agent. She asked where I was going, and I said Spain. She then ask, “for how long?”. To which I replied “one year.” That got her to raise her eyebrow a bit, since I’m sure she’s well aware that Canadians can only spend three months at a time in the EU. I then explained that I had a long-term residency visa for Spain, which she quickly located inside my passport.

One thing I didn’t know at the time is that there are four classes of EU visas, each with a letter: A, B, C, D. Type D is one that allows you to stay for a longer period of time, and I suspect she was looking for that on the Spanish visa. When she found it (I didn’t even know it was there), she made a few notes in her computer and then asked me just some genuine questions about why I was moving to Spain, and what the process was like. She then stamped my passport and told me to enjoy myself.

I was told when I would arrive in Spain (since it would be on a flight originating from the UK) that they wouldn’t stamp my passport there again. That would mean I would need to keep my boarding pass as proof of the actual date of entry into the country. So that was my original plan.

My Passport, with stamps in the UK and in Valencia

But when I arrived in Valencia, Spain, a few hours later, there was a quick customs checkpoint. I was watching the agent there, and he wasn’t stamping any passports, so I suspect it was just a quick check to make sure everyone was legally allowed to be there. When I approached him though, I notice that he did have a stamp next to him, so I politely asked him if he would mind stamping my passport, which he happily did. So I ended up with an official EU entry stamp for Spain on the exact date my visa was valid on.

I’ve heard of other people having to go to the police station to receive official paperwork indicating the exact day they arrived, but that seems a bit excessive to me. I would think it’s enough to simply do your best to get a stamp in your passport, or worse case, keep your boarding pass and any receipts in airports along the way that have the date on them.

My first shot in Valencia, Spain

My first shot in Valencia, Spain

After 17 hours of travel, I was exhausted, but was thankful my arrival into Spain was pretty much non-eventful. The next step would involve obtaining my TIE card (which is what you need to make your residency semi-permanent), and my empadronamiento, which is the proof you need for certain government bodies to show you actually live in Spain. More on those later.

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