A Spanish Mortgage as a Foreigner? Yes.

This is the most popular post I ever had on my old website, so I am reposting it here. I love that I'm not the only one who wanted to plant roots here in Spain, so the more the merrier if you're going to buy a house to make a home!

Background: I moved to Spain, with my family of 4, in August 2023, on a 3-year teletrabajadores de charácter international (“digital nomad”) residency. I am a United States citizen, and am also nearing the resolution of my dual Italian citizenship. We live in the city of El Puerto de Santa Maria, in Cádiz province, Andalucía. We aren’t technically “digital nomads”, we aren’t planning to ever leave Spain and bought our house in order to raise our kids in it and continue to integrate into our community.

TL;DR:

- If you recently moved to Spain and want a mortgage, it’s easiest to apply for a “nonresident” mortgage, where your financial risk assessment is done with past tax returns, bank statements, your full credit report or risk report from your previous country, and your proof of income.

- Nonresident mortgages are typically given for 70% of the purchase price but CAN be given for a bit more, depending on your lender.

- In addition to the price of the house you will need 10% of the house price for fees and taxes, so even though you will put down 30% you will technically need 40%. Those fees are not able to be added to the loan.

- UCI is known for approving foreigners

- Each bank has their own list of documents they want to see and will ask you for additional things if needed

Before we left the USA, we found a realtor in Spain who we trusted (he was a friend of the admissions director at our kids’ future school in Spain) and he took us through houses via FaceTime so we could rent something prior to arrival. We of course asked if he could then help us start looking for a house to BUY. When we arrived and moved into the rental, we had 10 months to find and buy something before the rental contract would end (houses on the coast are often rented only for the school year from September to June, and then turn into vacation rentals for the summer). We had started to become friends with our real estate agent after relocating and trusted him, so after he had taken us through homes to buy and we found the one we wanted, he was very good at explaining the entire procedure - which I am going to attempt to detail here for others who are starting this process.

The first bank we spoke to in Spain was our local Santander branch. NOTE: Your branch is not the same as mine, and although all of your paperwork will be eventually sent to a central office for scrutiny and approval, the branch you go to matters, a lot. I’ve learned that the managers of the branches have a lot of say and influence on this process. However, as you’ll read, even that can fall flat sometimes. The manager of my local Santander branch has done millions and millions of dollars in mortgages for clients of my realtor over the years and they know each other well. When my agent took us to Santander the first time (long before we needed a mortgage, as we had just landed in Spain), the manager set us up with a “resident” joint checking account, with zero fees and full resident privileges, even though we were still technically there as tourists and had not even submitted our application for the DNV yet! Many people believe it is a hard fast rule that you can only be given a nonresident account with fees and such until you are a resident or tax resident, but I have learned many times now that there are NO hard and fast rules here. The manager who handles your things will always be able to bend rules if he wants to. We opened our account with him with ONLY OUR U.S. PASSPORTS. Santander Man set us up with the account, debit cards, set up our apps, and removed all of the transfer limits. He told us that he did this for the future mortgage we would have with them, so transferring larger sums of money for down payments and such would be possible. This also made me believe he would get our mortgage process done. However...

When it came time to apply for a mortgage, even though he had led us to believe it would be easy through him, it went sideways. He handed me a sheet with a detailed list of documents that he said I needed to print out and bring to him in a stack. The list of documents, for some reason, was written in English. The bank manager does not speak even one word of English, but the sheet was in English and said at the top that it was Santander’s “nonresident mortgage document list”. I found and printed off nearly 100 pages of various documents. Included was even a request for our entire credit reports from the US - listing every account we’ve ever had as far as credit cards, loans, past mortgages, etc. I brought the folder of documents back to the bank, and he was not there, but they called him and he directed them to put the folder on his desk.

At the time I am writing this, it has been 4 months since the day I dropped it off and I still have never heard from him with an answer - yes, no, or otherwise. I emailed him twice for an update in the first few weeks, but he ignored it. When I explained this to my agent about a month after applying, he went and spoke to him and found out that the guy simply “did not feel like translating” the documents because I had printed them in their original English forms (tax documents, etc). I didn’t get them all translated because the list he gave me was written in English, so I provided them as-is. He had simply tossed them, and never asked me to just get them translated.

On to the next thing… my agent asked UCI (they are more of a credit union than a bank, but they are a popular mortgage lender, especially for foreigners, known for approving nearly everyone) to do a sample mortgage for the property we wanted to buy. The sample was nice to have because it was the first time I could read through all of the terms and see how mortgages work here. They showed different terms for 20 and 30 years, different rates, sample monthly payments for each - it was very in-depth. UCI did not have great rates or terms, but my agent said they were good to apply to, because if it came down to it and they were the only approval, at least we had one secured and could refinance it in a few years.

UCI sent a similar list of documents, but luckily wanted them Emailed (much easier). They confirmed that I did NOT need to translate them all to Spanish. My agent asked if I would be OK sending HIM my package of documents, because he would send it to some other banks for me. He knew the area’s bankers and who had approved whom, so I agreed and sent the package to him only. He then sent it to UCI, and a few other banks (to this day I only know about Caja Rural and UCI, because if he did send it to anyone else they never contacted me, and things escalated quickly in the weeks after these two submissions!) We were told of course that in the event of an approval, we would likely only be offered 70% of the purchase price of the house, because we applied as non-residents. Read on for more on that, though, because it is not set in stone!

THE NONRESIDENT MORTGAGE and WHY? This refers to your TAX residency, not your physical residency. Of course we are residents of Spain, we sold our house in the US and moved here, applied for and were approved for a legal residency. But since we had not become tax residents, the easiest way to apply for a mortgage without having years of income from working while a tax resident of Spain, is the nonresident mortgage. For this type, you use your tax returns, bank accounts, and income proof from your last years of work OUTSIDE of Spain.

UCI came back asking for a few more documents in the next days, and I returned each. They then asked some questions about our intentions here in Spain. They wanted to know if we sold our home in the US (yes, we did) and if we owned any property anywhere else (no, we don’t). Eventually they told us why they were asking — they said if they could demonstrate to their risk department that we never intended to leave Spain, and that we were buying this house to LIVE IN, not to rent out or to make money from, that they might be able to get us a loan of more than the nonresident 70%.

When we were approved by UCI, they offered us 74%! So our downpayment with UCI would have been only 26% instead of 30%. So again, the 70/30 “nonresident mortgage” is also NOT a hard and fast rule. But they did ask us to demonstrate that we were not planning to leave the country or use our home for income generation, including proving that we had sold our former house, and our credit reports showing every past mortgage being paid in full.

2 weeks after UCI’s approval, Caja Rural started to ask us for more documents. We met with the manager of that branch, and he explained that he would also attempt to get more than 70% financing for us, but that his bank was more strict than UCI. He was not kidding! At the end of that process, they had requested about 40 more pages of various things, including 6 more months of bank statements (so one full year in the end) from both of our personal and business accounts. 3 years of FULL tax returns. Proof of all past accounts (credit report) and furthermore they asked for the last 3 months of statements for every credit card showing as currently open on the credit report.

When we finally got our Caja Rural approval, the terms were so much better than UCI’s, we had to tell UCI we were not going with them. Interest was lower, there was no commission (UCI had a hefty commission, Caja Rural had zero), the monthly payment was 1000 Euros less with Caja, and there was also the fact that UCI is not a bank - Caja Rural is a full bank with a local branch in my neighborhood. This won’t apply if you aren’t planning to live in your Spanish city long-term, but I believe that a relationship with your local bank branch is something you really want if you intend to live in an area long-term, and we do. Relationships matter! So in the end, we accepted the mortgage from Caja Rural, opened a checking account there, a credit card account, and dumped our Santander accounts for good. If we had gone with UCI for the mortgage, since they aren't a bank, we would still have had to stick with Santander for our other banking (or to find another bank and start from scratch with new accounts - it was just so easy since our mortgage is with Caja Rural, to transfer everything over and bank with them).

After all of this, the last piece of the puzzle was to have the "tasación" which is loosely translated as the appraisal, but it is also the home inspection. They are the same thing done by the same person, who is a licensed architect. The value that the architect comes up with from this can have an affect on your mortgage, because if the value isn't high enough the bank won't give you the amount that you were approved for, for the house you want. They are pretty good about these appraisals, but there is one loophole that almost tripped us up on this house. Due to a Spanish real estate law, if the property was made larger by additions over the years, they needed to have registered that with the city. If they did not (basically an unapproved home improvement - these are common here), then the architect who does the appraisal is forced to use the OLD size of the house in the appraisal. Example: The house we bought is, say, XYZ square meters, but it was originally less -- and because of this law, he was forced to appraise the house as if it were the original number of square meters. This can affect the value of the house, of course. We were lucky, because his appraisal came in above the threshold that our bank told us they would need in order to finance what we were approved for. ALSO - again with lax rules - the appraiser told my real estate agent in advance that he did not think it would be a low value or low enough to wreck the loan. Everyone involved talks and you can find things out in advance. I was also invited to come to the appraisal, because I wanted to take some measurements of some of the rooms and areas and they just let me show up and do it at the same time he was appraising. Where I moved here from, that would never be allowed!

The last step in buying a house involving a mortgage is to have two notary appointments. The first is where they take all of your documents pertaining to the mortgage and house purchase and they basically read them off to you. If you do not understand Spanish well enough to know every single piece of what your documents state, you will NEED to bring an interpreter or someone who does understand it very well and will explain it to you. They will sign that they are your direct translator. At the end of that process, you'll be tested on your understanding and asked questions about what was in the terms. If you do not pass that informal quiz, you have to come back and go through the appointment again until the notary is confident that you know EXACTLY what you are signing. After that, when everything is ready, you will have the second notary appointment where you sign everything and are handed your keys. Now, the house is yours! Well, yours and the bank's.

OF NOTE: Various countries have various processes, and I can only speak in reference to the United States, but the inspection and real estate rules in general are very different. Homes are sold "as-is" here, and not improved or fixed prior to you assuming ownership. Example: When we attended the inspection to take measurements, it was raining very hard outside. I noticed a puddle on the kitchen counter, and following the trail I then noticed it was all over the floor as well. Looking up, I saw a crack in the ceiling above the water - when I mentioned it to everyone (my agent, the inspector, the homeowners), it was shrugged off, "It's probably a broken roof tile, it happens!" My agent said that you just call your homeowners insurance and they fix it, or if I wanted to do it out of pocket that it's not expensive. So just know that there could be an issue like this, and it's your issue. And that your insurance will cover the fix.

ALSO OF NOTE: The fees and taxes that are added to house purchases in Spain amount to about 10% of the home price. So even though you know you will need about 30% of the house price as your down payment, do not forget that you will need to have another 10% ready to pay as well, and that cannot be added to your loan. So if your house is €500.000, you will put down €150.000, finance €350.000, but then you will also have to pay fees and taxes of around €50.000 more (so you’ll need €200.000 of your own cash for the whole process).

Hopefully this is all of some help to others who are headed into the mortgage process. And now, of course, I have years of experience and have built a team of incredible experts so we can assist with this entire shitshow for those who don't want to go through it all. Feel free to chat us up anytime: belongabroad@gmail.com