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Getting a mortgage in Tenerife
With Spanish mortgage rates being the lowest they’ve been for years and lending in general becoming a little more flexible, mortgage lending in Spain is increasing, so let’s see how easy it is getting a mortgage in Tenerife.
It’s still not easy to get a mortgage as a non-resident…or even as a resident for that matter but nevertheless…it’s becoming a little easier.
If you’d like to start the ball rolling on getting some figures, answer the questions below…
All Spanish banks deal with residents looking to borrow money via a mortgage and they also deal with non-residents but Spanish mortgages for non-residents are more difficult to obtain and there’ll be a few more hoops for you to jump through too.
I thought I’d write an article about the process and what’s needed to get a mortgage in Tenerife because my last article was written a few years ago and also written during the financial crisis, when Spanish mortgages had all but disappeared…and the article was very negative and not very up-beat.
In this article, I’m going to write about non-resident mortgages in Tenerife because if you’re a resident, you’re already living here and can pop into pretty much any bank in Tenerife and find out what you need to do to get the ball rolling.
I’d also like to point out that as I write this article in 2017, lending procedures and criteria are still evolving, so what I’m going to write isn’t cast in stone and banks will differ to each other in their lending amounts, loan to value calculations and criteria.
As a non-resident you’re generally going to be allowed up to 60% loan to value (LTV). This means that the bank will lend you 60% of the value of the property or the purchase price whichever is the lower.
So, thinking about the last few words of the previous sentence, one thing to consider here is that just because they say they’re going to lend you 60% doesn’t mean that it’ll be 60% of the purchase price.
Here’s what I mean – and skip this bit if you know what I’m about to say – if you’re buying a property for €200.000, that’s the agreed price between you and the seller, that doesn’t automatically mean that you’ll be able to borrow €120.000 though.
The bank will want to have the property valued and if the property is then valued at €180.000, then they’re only going to lend you 60% of that value, not the €200.000 agreed purchase price.
This new lending figure is €108.000 that’s €12.000 less than the €120.000 you originally thought they’d lend you…and now, you’re going to have to find that extra €12.000 yourself if you want to carry on with the purchase.
One thing you could do is see if the seller will come down a little in price so that you don’t have to find as much extra cash…but as I write this article, prices have stabilised well here in Tenerife and increasing in some areas…so there may be little chance of that.
Now, if you know anything about buying a property here (and if you don’t you might want to hop over to my videos about how to buy a property in Tenerife), you’ll know that to remove the property from the market, you need to put down a 10% deposit…and this is non-refundable…so what happens if you’ve agreed to buy the property for €200.000 and it gets down valued, in the example above and you can’t find the extra €12.000?…well, you’ll lose your 10% deposit.
What can you do? Maybe before you get into signing contracts and completion dates you can ask the agent to ask the owner if they’ll be prepared to refund the deposit if you’re unable to obtain a mortgage within a certain time-frame… that’s what we do here at Tenerife Property Group.
We agree with the vendor that the buyer can have 14 days to arrange a mortgage and if they can provide written proof from the bank that confirms that they can’t go ahead, they can have their deposit back. We think that’s a fair way of going about it.
Lending criteria here can be a little tougher than in your home country. Because you’re a non-resident, they’ll want to know everything about you…and a little bit more at times too.
I very often get asked “What do I need to provide to get a mortgage in Tenerife?”
Here’s a list…although not definitive because as I said before, lending amounts and criteria change from bank to bank.
You’ll almost certainly need to provide the following if you’re a UK mortgage applicant.
- Last P60
- Last 6 months payslips
- Last 6 months bank statements
- Credit report (www.experian.co.uk) for all applicants
- Last annual mortgage statement (UK main residence)
- Copy of employment contract if P60 is not available or if you’re working in a tax exempt industry
- Proof of deposits. The bank requires proof of the difference between the purchase price & amount of mortgage requested from the lender.
For self-employed individuals: (In the UK)
- Latest Self-Assessment Tax Return
- Profit & Loss accounts for that return
- Balance sheet up to date
- Last 6 months personal & business bank statements
- Credit report (www.experian.co.uk) for all applicants
- Last annual mortgage statement (UK main residence)
- Proof of deposits. The bank requires proof of the difference between the purchase price & amount of mortgage requested from the lender.
You’ll also need your passport and NIE number and if you haven’t got your NIE number yet, you’ll need to get that before the bank will go much further with a decision.
A mortgage application generally takes between 4 to 6 weeks to obtain, depending upon how quick and organised you are in getting the required paperwork to the lender.
There are a number of different types of mortgages but generally speaking they’re capital and interest repayment type mortgages, rather than interest only and most lenders will only lend up to the oldest borrower being 75 years old.
Rates can be fixed or variable but more often than not, they’re variable following the EURIBOR rate of interest.
As I said earlier, getting a mortgage in Tenerife isn’t the easiest of things to do but it is possible with the right paperwork to present to the lender, that’s why using a mortgage broker might be the easiest way to go, that way, you’ll probably stand a better chance of getting one.
