Summary.
It is not easy getting a mortgage in Spain, but it is possible provided that you can convince the bank that you are a safe bet.
In general Spanish banks will give no more than 60% or 70% mortgages.
As a basic rule, if your bank in your home country won't give you a mortgage then a Spanish bank won't either.
The banks
Banks in Spain are no different to banks in the rest of Europe.
There are 2 basic rules that they apply.
1. You have to have security.
2. You have to show that you can make the repayments.
Where should I get apply for a mortgage?
Ideally you should apply for a mortgage in the country where you can prove your security and your income which is usually where you also pay tax.
If you are intending to move lock, stock and barrel to La Palma with no income or property in your (old) home country then obviously you will need to apply to a bank in Spain.
If you have security (property) in your home country and income in your home country then the best option is to ask a bank there. It will be a lot easier to convince them that you are a safe bet than it would be to convince a Spanish bank. Your 'foreign' pension or benefits may not carry much weight in Spain.
In other cases it will depend on which is easiest to prove.
Security using a property on La Palma.
If you apply for a mortgage in Spain with a property in Spain as security the banks will base their offer on the valuation of an official valuer which a Spanish bank will usually arrange. This valuation is often lower than the market value.
Special care has to be taken with older properties. Roughly speaking, the Spanish banks require that a property has been registered with the Land Registry for at least 2 years. Older properties may not be registered in the correct way, especially if they have not changed hands in the last 10 years. Whilst the ownership may not be in doubt the banks are super careful and will insist on waiting for 2 years after a first inscription before considering a mortgage.
Income requirements.
As with all banks you will need to prove to a Spanish bank that you have a regular source of income in the future. They will base their judgement on your financial history and prospects of continuity.
Euro-based pensions are usually acceptable. Non-euro based pensions may be valued lower to allow for currency fluctuations.
Usually the bank will ask for tax and bank statements for the previous 2 financial years. They will also ask for proof of continuity, so if your income will change or stop because of your move to La Palma your mortgage application may not be accepted.
If you are 'starting again' on La Palma with a new business or a new job it is unlikely that a bank will accept a mortgage application in the first 3 years. This is because you have no proof of continuity of income and no banking history with them. If you are not self-employed then only a permanent salary with a long term contract will suffice. Self-employed people have to show 2 successful financial years with adequate income and profits to be entertained as potential applicants.
Bear in mind that the banks know that many people who dream of an easy life on La Palma leave within a few years. You have to prove that you are not one of them.
Tell the estate agent.
It is very important that you tell the estate if you will need a mortgage before you start looking at houses. The bank rules may prevent you getting a mortgage on a specific house, or other requirements may rule out a mortgage in the first few years. Please tell us before we spend time and effort looking for suitable houses and arranging visits to houses. We need to check suitability for mortgage purposes.
It can lead to disappointment on your side and irritation with sellers and estate agents if you do not.
How can LivingOnLaPalma help.
We cannot change the bank rules and regulations.
We can help you to prepare the presentation of your application to a bank, find a bank which may accept your application and be there when you talk to the bank to explain your situation.
