A bank in the home country rarely finances a vacation property in Spain unless you can offer the bank collateral in the home country. A Spanish mortgage is usually only available with a variable interest rate, which is higher than in Germany, for example. If the reference interest rate of the European Central Bank or Libor increases during the term of the mortgage, the interest rate of the Spanish mortgage will also increase.
A law that came into force in July 2019 (Ley de crédito inmobiliario 5/2019) means that buyers who take out a mortgage with a Spanish bank are now somewhat better protected. For those who take an advance loan but do not want to build or buy until later, the bank will be allowed to charge a maximum of 3% commitment interest for 12 months, not just three months as before. The cost of the mortgage is now divided fairly between the bank and the borrower. The bank must pay the notary fees, the costs of registration in the land register and the taxes due in this connection. The bank's entitlement to an early repayment penalty in the event of early repayment of the loan is now capped.
However, it is impractical that the notary must now observe a cooling-off period of 10 days before registering the mortgage. Many people do not have that much time. The only thing left for them to do is to hire a lawyer to sign for them at the notary's office.
During the waiting period, the Spanish bank that is to finance the property checks whether the buyer is creditworthy on the basis of the documents handed over to it by the notary. If you have less than 30% equity or more than 30% of your monthly disposable income to pay for interest and repayments, the bank will probably reject your loan application under the new law.
In addition, the notary must give the prospective buyer two forms from the bank: The FEIN (General European Information Card) and the FIAE (General Card on Risks). These forms contain information about the mortgage, such as closing fees, early maturity of the total loan in case of non-payment of installments and related fees, as well as other parameters.
