The process of getting a Gran Canaria mortgage can be long and Spanish banks have become cautious since the crisis.
However, after several years of shell-shock, they have started to lend again and competition is beginning to heat up in the mortgage market.
Getting a Gran Canaria mortgage
To get a mortgage you must have a 20% cash deposit (plus the 10% in cash that it costs to buy a property in Gran Canaria) and prove to the bank that you can make the repayments. In general, they only lend if your liabilities (existing loans, mortgage payments) represent less than 35% of your monthly income.
For example, if you want to take out a mortgage which will be 350 euros a month, you must earn 1000 euros a month and not have any other loan payments. They will check your ability to pay by requesting the following documentation…
- wage slips from the last 3 months
- bank statements for the last 6 months
- If you are self-employed, copies of your last 3 years of accounts (with an auditor’s stamp) and copies of you last 12 month’s business bank statements and your last 6 months personal bank statements).
As always, you will need to feed the photocopier with your ID, residencia and the one piece of paper you didn’t bring with you.
Banks in Gran Canaria do NOT take future rental income into account when calculating the amount of money they will lend you to buy a property.
Spanish banks currently offer mortgages of 60-80% of what a property valuation firm says that it is worth (you pay about 300 euros for this valuation as part of the mortgage application process).
Most banks offer variable rate mortgages that last from between 12 and 40 years.
Interest rates in Spain vary, but are generally (2016) a little lower than in the UK. The rate is set using the EURIBOR interest rate published by the European Money Market Institute.
Your mortgage rate will be expressed as EURIBOR plus a percentage (eg. Euribor más 0.75%) and varies depending on whether the EURIBOR rises or falls. With the rate currently negative, mortgages in Spain are at rock bottom levels.
It is always worth applying to several banks (you only have to gather the paperwork once) as the rate, property valuation, and other conditions vary considerably between banks and you never quite know what headquarters in Madrid (all applications are sent to Madrid for approval) will say.
There is no harm in playing the banks off against each other.
Ask for a copy of one bank’s offer and then take it to a different bank to see if they can improve the offer – they often will. Then take the improved offer back to the original bank – you may get a pleasant surprise.
Gran Canaria Mortgage costs
During the mortgage application process, you have to pay for a valuation by a professional valuation firm (200-300 euros) and you will also pay a gestoria (bureaucracy consultant/paperwork company) to handle all the paperwork (around 250 euros); Your bank will assign one, you’ll pay for it.
Spanish banks have a habit of attaching other products to their mortgages to boost their profits. For example, you will have to pay for annual life insurance that covers the entire mortgage, and property insurance that covers its replacement value in the case of a fire, etc.
Non-resident mortgages in Gran Canaria
Non-residents need a minimum deposit of 30% plus the 10% in fees and taxes that you need to buy a property. That’s a minimum of 40% of the value of a property befoe you can get a mortgage as a non-resident.
You may also be asked to provide an aval (guarantor). This will be somebody usually based in Spain who agrees to pay in the event of you being unable to.
New Build Mortgages
As well as paying slightly more IPT tax (7% rather than 6.5%), buying a new build property has the disadvantage that the constructor (builder) or promotor (promoter) has a mortgage deal agreed with a particular bank. The rates and conditions are fixed and you have to accept them.
With rates as low as they are at the moment, there is rarely much benefit to changing your mortgage provider as the process is long and expensive (fees are around €3000). However, if you are locked into a mortgage with high rates, it is worth looking into.
The Clausula Suelo
Spanish banks used to put a floor under the interest rate on their mortgages which basically locked in their profits if interest rates dropped. However, the EU has ruled this floor, known as the clausula suelo, illegal and told the banks to scrap it and TO RETURN ALL THE EXTRA, ILLEGAL INTEREST THEY COLLECTED.
If you have a mortgage in Spain with a clausula suelo, you are entitled to go to your bank and demand that they return all the excess interest you paid over the years.
These sums can be substantial so don’t expect your bank to hand it over without a scrap; They aren’t exactly falling all over each other to obey the courts.
Rather than give you the cash, the bank knocks what they owe you off the outstanding mortgage debt.
The best Gran Canaria banks
Mortgage offers change all the time so we recommend that you shop around extensively and apply at several different types of bank…
- The traditional Spanish banks such as BBVA and Santander
- The local banks such as Bankia and / or a Spanish caja (equivalent to a building society and just as endangered).
- A foreign bank such as Bankinter and Deutsche Bank
- An alternative bank such as EVO.
Help getting a Gran Canaria mortgage
If you speak fluent Spanish and know the local property market, feel free to ignore this advice.
Use a good local estate agent when you buy a Gran Canaria property: They will help you with the process of getting a Gran Canaria mortgage and make sure that you pay a fair price for your property.
Best of all, estate agency services are free for the buyer as the seller pays all their fees.
In Las Palmas and north Gran Canaria, talk to Laura at Las Palmas Property.
In south Gran Canaria, just go to Cárdenas Real Estate.