Perhaps the first point to mention is that in Spain there are two main financial entities that you can apply for a mortgage from. The banks in Spain work all on a similar basis, and are classes as Bancos – International brands such as BBVA and Banco Santander will be familiar with most readers. The second type of entity are the “cajas” or “cajas de ahorros” which are usually autonomous societies, formed as savings banks or building societies – often born in fruitful autonomous regions and occasionally expanding nationwide. Perfect examples would be Caja Madrid, Catalunya’s La Caixa, and Caixa Catalunya. These entities are sometimes easier to gain a mortgage from, although conditions can often be easier manipulated to the favour of the caja, rather than those rules rigorously set down by the Banco de España.

Now within the Cajas or Bancos, there are various products on offer when it comes to taking a loan out on a property. For the sake of example, let’s take a first time buyer on a starter home. Perhaps one of the main differences in any type of loan from a financial entity is the type of interest paid. It’s extremely common in Spain for an interest rate to be applied to your loan sum on an annual basis, with a revision each calendar year, around the same date as you sign your mortgage. This means that although interest rates may fluctuate, as they tend to do, then if you happen to sign your mortgage in the “highest peak” of interest, then you will pay that amount of interest for the entire year – even if interest rates go down. This has the advantage of always knowing your monthly budget of spending, but the converse is true in that if you coincide with a peak which then drops dramatically, you’re stuck with the same rate for the rest of the year. Mortgage “trackers” working on a month to moth basis, known across the world, are unknown in Spain.

Just to make things more complicated, there are then two different types of indexes your bank or building society can chose to employ regarding your policy. The Euribor is the European Interest rate, although it’s worth noting that within the Eurobor, there is a separate (always higher) Euribor Mortgage rate.

The second Interest rate that may be applied is the more stable IRPH, which takes an average of the previous 4 months Euribor and then calculates the rate this way. Any loan from a bank or building society will charge the client (that’s you) one of these two rates, plus anywhere between 1-3%, depending on the risk, size of the property, available guarantors, etc. (remember, my example here is for first time buyers).

Any loan from either entity usually has a 1% opening fee on the net price, and the same for any cancellation before the time of the loan expires – loans are typically given for 30 years, although in recent years, certain banks have given loans of up to 50 years, or those which will be inherited by next of kin/offspring. This means that swapping and changing mortgages over banks is almost impossible in Spain, given the costs involved. A 1% cancellation fee in one bank followed by a 1% opening fee in the second (even if this is waived) means that there needs to be a considerable saving on the general conditions offered by another entity for it to be worthwhile considering. It almost becomes a stock market game, playing the possibilities of the possible rise in inflation – something that few people saw coming in the latter part of 2008, for example.

As referenced, many people are buying property in Spain for vacation and holiday purposes. (This includes both apartments and single family residences in different parts of the country.)

In many instances, foreign nationals are buying real estate in Spain that they can utilize for their own travel and holiday purposes during part of the year and which they can rent to other individuals seeking a vacation spot at other times during the course of a given year. Thus, these men and women are buying property in Spain for a dual purpose: holiday travel and income generation.

The tax and related laws in Spain make this kind of dual property ownership a profitable enterprise for most overseas buyers. Indeed, it is expected that more and more foreign nationals will invest in vacation real estate for this dual purpose well into the coming decade. They suggest that the growth of the European Union will spur on this type of real estate investment in Spain and in some other countries that comprise the EU at this time.

Specific steps to buying real estate property in Spain

At the present time, there are no significant restrictions to a foreign national purchasing and owning real estate in Spain. Indeed, foreign nationals are able to purchase and invest in nearly any type of property to be found for sale within that country — commercial, residential or other types of investment real estate.

When it comes to making the purchase of property in Spain, many experts maintain that a person is well served is he or she takes the time (and spends the money) to hire a lawyer to assist in managing and overseeing the legal affairs associated with the successful purchase of real estate in Spain.

Once a person identifies a piece of real estate that he or she is interested in purchasing, the first step in the purchase process (after an oral offer to purchase has been made by the buyer and accepted by the seller) is the creation of a preliminary or initial contract for sale. In Spain, it is highly recommended that a person makes absolutely certain that the ownership of the property and any encumbrances on the property are clearly identified before this agreement is signed.

In most instances, a preliminary contract is a fairly substantial and a firm legal agreement. Along with the agreement itself, a buyer will need to put down a deposit of at least 10% of the total purchase price. Under the real estate laws of Spain, the buyer has a more significant burden than is found in some other countries to ensure that the title to the real estate has a title that can be conveyed to the buyer at the conclusion of the sale (clean title). Thus, there are instances in which a title proves to be imperfect, in which the ultimate transfer of ownership cannot occur, and in which the buyer may lose out on the deposit he or she paid because they simply did not carry out the correct checks at the outset.

Many people who have experience in dealing with the buying and selling of property in Spain suggest that foreign nationals should retain the assistance of a capable lawyer at this juncture. While Spanish real estate laws are not particular confusing or difficult to understand, a person seeking to buy a property in Spain bears a greater due diligence responsibility early on in the real estate buying and selling process than do buyers in some other nations.

During the period following the signing of the preliminary or initial contract, the buyer has the opportunity to obtain financing and a mortgage loan to consummate the sale and actually purchase the real estate.

Again, as referenced earlier, the buyer of real estate in Spain has a bit of a stiffer burden to make certain that the title to real estate in Spain is clear before he or she makes a purchase. Additionally, a buyer bears a greater burden than buyers do in other countries when it comes to making certain that there are no mortgages or liens from other lenders on a particular piece of property. While in most other countries the world over, the burden for “clearing title” generally rests nearly exclusively with the seller, such is not the absolute case in Spain.

Unlike in some other countries the world over, the laws governing the buying and selling real estate in Spain generally are uniform across the country. There really are no regional or local differences.