At the time of writing, the amount of borrowing that banks are prepared to provide varies considerably. Equally, the computation of what they will lend with regard to a given mortgage in Spain is difficult to determine as anything more than a generality.
The preferred method for banks to establish the viability of providing a mortgage in Spain is to find out the ability of the person concerned to make regular mortgage payments. This is called the debt/income ratio. Lenders normally assess net monthly income after deducting worldwide debts and then come up with a maximum possible monthly payment. This then defines the size of mortgage they will grant together with its term (5, 10, 25, 30 or 40 years etc.). Normally the debt/income ratio is between 30% - 50%.
You may, for example, earn 2,000 Euros a month net. However, you may also have a car loan and an HP agreement amounting to 200 Euros a month. If this the case, then the following computations could be made:
40% debt/income ratio
Income of 2,000 E pm multiplied by (say) 40% = 800 E
Less loan and HP debts (200) E
Maximum potential monthly payment = 600 E
This would allow you to have a mortgage on your Spanish property of 100,000 Euros if it was for 25 years at a 4% interest rate. The monthly premiums would be 527 Euros pm – a little less than you can actually ‘afford’.
50% debt/income ratio
Income of 2,000 E pm multiplied by (say) 50% = 1,000 E
Less loan and HP debts (200) E
Maximum potential monthly payment = 800 E
This would allow you to have a mortgage of 140,000 Euros if it was for 25 years at a 4% interest rate. The monthly premiums would be 738 E pm.
Obviously, the maximum amount that your lender decides you can pay and the size of mortgage that you will be granted varies depending upon the interest rate applied at the time and the length of the term of the Spanish mortgage. Accordingly, the computations above could change significantly depending upon given conditions and the computations used. However, as a ‘rule of thumb’ they are a useful guideline.
Finding the right mortgage for your Spanish property is always difficult and there is much to be gained from taking independent professional advice. This is provided by a range of mortgage brokers both native Spanish and North European. The latter are frequently professionals who have settled in Spain and within these there are some brokers who are British and have relevant UK qualifications and previous mortgage broking experience.1
The preferred method for banks to establish the viability of providing a mortgage in Spain is to find out the ability of the person concerned to make regular mortgage payments. This is called the debt/income ratio. Lenders normally assess net monthly income after deducting worldwide debts and then come up with a maximum possible monthly payment. This then defines the size of mortgage they will grant together with its term (5, 10, 25, 30 or 40 years etc.). Normally the debt/income ratio is between 30% - 50%.
You may, for example, earn 2,000 Euros a month net. However, you may also have a car loan and an HP agreement amounting to 200 Euros a month. If this the case, then the following computations could be made:
40% debt/income ratio
Income of 2,000 E pm multiplied by (say) 40% = 800 E
Less loan and HP debts (200) E
Maximum potential monthly payment = 600 E
This would allow you to have a mortgage on your Spanish property of 100,000 Euros if it was for 25 years at a 4% interest rate. The monthly premiums would be 527 Euros pm – a little less than you can actually ‘afford’.
50% debt/income ratio
Income of 2,000 E pm multiplied by (say) 50% = 1,000 E
Less loan and HP debts (200) E
Maximum potential monthly payment = 800 E
This would allow you to have a mortgage of 140,000 Euros if it was for 25 years at a 4% interest rate. The monthly premiums would be 738 E pm.
Obviously, the maximum amount that your lender decides you can pay and the size of mortgage that you will be granted varies depending upon the interest rate applied at the time and the length of the term of the Spanish mortgage. Accordingly, the computations above could change significantly depending upon given conditions and the computations used. However, as a ‘rule of thumb’ they are a useful guideline.
Finding the right mortgage for your Spanish property is always difficult and there is much to be gained from taking independent professional advice. This is provided by a range of mortgage brokers both native Spanish and North European. The latter are frequently professionals who have settled in Spain and within these there are some brokers who are British and have relevant UK qualifications and previous mortgage broking experience.1
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