Financing a property: German or Spanish bank?

Financing a property in Spain with a German bank

There are a few basic things to bear in mind: In principle, most banks based in Germany do not offer mortgage loans for holiday homes abroad. This is only the case if there is sufficient collateral in Germany - for example, in the form of a house. It should be noted that a holiday property in Spain is not directly mortgaged. The situation is different with German banks that also operate in Spain. These are subject to Spanish law and therefore encumber the property locally.

A clear advantage of financing a property through a German bank is the "German" terms and conditions. These include a fixed interest rate for the duration of the loan, which is currently available for around 1%, making it a very attractive financing option. This means that the interest rate and the associated financing instalment will remain unchanged for the next few years.

However, it should be added that many banks in Germany find it too risky to finance property in Mallorca, despite the ever-increasing property prices. This is due to the fact that property valuation from Germany is much more difficult, as there is often a lack of in-depth knowledge of the property market in Mallorca.

If you choose to finance your property through a Spanish bank, there are two different types of loan available. It is important to note that these can be combined.

Fixed-rate mortgage or mortgage with variable interest rate

If you opt for a fixed-rate mortgage, the key advantage is that the interest rate remains the same throughout the term.These are usually limited to a maximum of 30 years.It is important to know that the loan must be repaid in full during the financing period, so that no residual debt remains.

An adjustable-rate mortgage, on the other hand, is linked to the Euribor (European Inter Bank Offered Rate), which means that the interest rate is reviewed and adjusted annually.The interest rate for the first 12 months is determined by the Euribor for the month in which the contract is signed. The bank also adds a fixed margin. The fee to be paid covers the bank's costs for property and credit checks and is usually between 1% and 1.50% of the loan amount. Financing a property in Mallorca through a Spanish bank

Mortgage tax in Spain

If you are considering buying a home in Spain, there is one major drawback: The mortgage tax, also known as stamp duty. From 2020, this will amount to 1.5% of the so-called liability amount in Mallorca, which is approximately 1.5 times the loan amount. Since November 2018, the Spanish government has stipulated that the mortgage tax for private individuals must be paid by the bank. In return, interest rates have risen.

Required documents

Most Spanish banks use net income as a basis. In addition, a list of the current monthly costs in Germany and the new monthly costs in Spain is required. These costs must not exceed 1/3 of the proven net monthly income. Some personal documents are also required:

• Photocopy of passport or identity card
• N.I.E (Tax Identification Number)
• The last three payslips
• Last income tax return
• Last income tax assessment notice
• Assets and property
• Bank statements for the last 3 months
• Object-related documents

Your partner in the property search

When it comes to finding the right partner to help you buy a property in Mallorca, transparency, expertise and reliability play an important role. As estate agents in Mallorca, DAHLER & COMPANY will always be at your side as your permanent contact for all property matters. If required, we can also put you in touch with the right service providers so that nothing stands in the way of your holiday home and the purchase goes as smoothly as possible. With over 10 years experience and a large number of properties to our name, DAHLER & COMPANY is the right partner for you. You can find our offices in Mallorca on the following pages or here in the map.