The Guru Guide To Getting A Gran Canaria Mortgage

Getting a Gran Canaria mortgage

Getting a Gran Canaria mortgage

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.

2017 update: Residents can now borrow up to 90% of the purchase price from the right bank.

Gran Canaria mortgage interest rates

Interest rates in Spain vary, but are generally 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. Often you get the best interest rates if you agree to their add-ons.

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) often has a mortgage deal agreed with a particular bank. The rates and conditions are fixed and you have to accept them.

Changing mortgages

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.

For the latest on this story, please read this article.

The best Gran Canaria mortgage 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.
  • Online banks such as ING Direct.

Help getting a Gran Canaria mortgage

If you speak fluent Spanish and know the local property market, feel free to ignore this advice and use a local mortgage broker or go direct to the banks.

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 and read their guide to getting a Gran Canaria mortgage in 2017.

In south Gran Canaria, just go to Cárdenas Real Estate.


The Guru Guide To Buying Property In Gran Canaria

Beach front property in Gran Canaria

Beach front property in Gran Canaria

Buying property in Gran Canaria is a relatively straightforward process if done correctly. The island property registry is excellent, property rights in Gran Canaria are clear, and all contracts must be signed in front of an independent notary.

However, there are pitfalls and we advise all buyers to use a quality estate agent and / or a local lawyer to check their chosen property and contracts.

Estate agents in Gran Canaria

Estate agents in Gran Canaria vary from the average to the excellent with a couple of outlying dodgy outfits (targeting non-resident buyers in the resorts).

Estate agency fees are 5% of the sale price of a property but are paid by the seller. This means that their services are free to buyers; All non-native Spanish speakers should use one when buying property in Gran Canaria.

The risks of going it alone are just too high to bother with as disputes takes a long time and oodles of cash to resolve.

To find a good estate agent in Gran Canaria, look for the following…

  • An estate agency with an office you can visit and a good local reputation.
  • An agency that is connected to the BOICAN shared property database and can, therefore, show you almost any for-sale property in your chosen area.
  • An agent that speaks your language and good Spanish.
  • Above all, choose an estate agent that cares about you, rather than about selling you a particular property.

The benefit  using a good estate agency include their ability to value a property accurately (many sellers list their property at the price they’d like to get rather than what it is currently worth), the help they provide with paperwork, and good relationships with reliable local banks.

In Las Palmas and the north of Gran Canaria, we recommend Las Palmas Property.

In south Gran Canaria, just go to Cardenas Real Estate; One of Gran Canaria’s oldest and most trusted agencies.

NOTE: Do not buy a rental investment property in south Gran Canaria without getting expert advice:

The cost of buying property in Gran Canaria

The total cost of buying a property in Gran Canaria is roughly 10% on top of the price you pay.

This sum includes:

  • Fixed property purchase tax (the exact percentage varies depending on property type and Municipality)
  • Notary costs (a fixed percentage of the value of the property)roperty registry costs.
  • Property registry costs.

NOTE: The 10% figure is approximate. It can be up to 12% if you buy a cheapie under €100,000 and lower if you buy something substantial.

NOTE: Seek expert advice if a seller wants you to pay a percentage of the purchase price in cash under the table. This is illegal and has tax implications as the government knows what property is worth and asks for extra taxes on properties that are bought too cheap.

Ongoing costs include:

  • Monthly Communidad fees (if you buy in a building or complex)
  • A small annual tax on the value of the land your property sits on (known as the IBI)
  • Utility bills.

There are no council tax bills in Gran Canaria.

What you need to buy a property in Gran Canaria

All buyers must have:

A Spanish NIE number; This fiscal identification number, which you will soon learn by heart, is the same number that goes on your green Residencia paper. Getting a NIE is a faff unless you have a job contract or a pre-contract to buy a property (or are a non-EU citizen investing 500,000 euros in Spanish property; Hello Golden Visa).

A local bank account; Opening a non-resident bank account is straightforward. All you need is a passport. Change to a resident’s account once you get Residencia as the fees are lower.

Getting a mortgage in Gran Canaria

Spanish banks learned their lesson rather too well during the crisis and are now cautious about lending money to home buyers. You need a minimum deposit of 20% (unless you earn big money) and a work contract to even be considered (or a long track record of earnings as an Autonomo or self-employed person).

New arrivals often have to wait a year to get a mortgage, even with a permanent work contract. This might seem infuriating, but it’s no bad thing if you consider the number of people who go home after a year in Gran Canaria; not everyone can handle the sunshine and the rum.

Spanish banks currently won’t lend you more than you can pay back with a third of your total income.

Non-residents need a larger deposit (typically 40%) and proof of earnings in their home country going back six months. Spanish banks are unwilling to lend to older non-residents who are due to retire before their mortgage term is up.

Mortgage applications are long-winded (up to three months at some banks) and hampered by top-down management at Spanish banks. Your application is submitted in Gran Canaria but goes to Madrid (it’s always Madrid) by post for approval. Any missing documents cause delays that nobody is accountable for; Be vigilant and don’t be afraid to push as silence is often a bad sign.

The best advice we can give you is to apply to several different banks; They all require the same paperwork so all you have to do is spend a few hours at each one and feed them with photocopies.

At the moment, the best banks are the international ones such as Deutsche Bank and ING Direct, rather than the local banks like Bankia, Santander and BBVA.

International banks are faster, often offer better rates, and are more flexible with foreigners than hidebound Spanish banks.

Renting Your Gran Canaria Property

See this article for details on how to rent your property in Gran Canaria.

Summary

Use a good estate agent

Factor in costs

Apply to several banks if you need a mortgage

Be determined and patient