Getting a local mortgage in Gran Canaria requires a fair bit of paperwork. However, interest rates are low and Spanish banks are lending with good conditions. Here’s my guide to getting a Gran Canaria mortgage in 2020.
Gran Canaria mortgages in brief
Spanish banks ask for a lot of documents but once they have them all, are fairly efficient at getting mortgage applications processed.
The key to getting things done in Gran Canaria is preparation. The more you have ready, the faster the application process.
This is especially true because of how mortgage applications work in Gran Canaria.
Bank managers in Gran Canaria branches don’t have the final say on whether your application is approved. The best they can do is give you an educated guess about whether headquarters will approve your loan.
However, if you provide them with all the documents they need, they do get your application in fast and keep it moving forward.
It can take anything from a week to four months for a mortgage provider to come back with an answer. Once you have signed the “oferta vinculante”, the bank has committed to offering you a mortgage.
Always apply to several banks when you want to get a Gran Canaria mortgage. Each one has its own conditions and you are far more likely to get a good offer if you have several options.
Getting a resident Gran Canaria mortgage
Most banks ask for a minimum 20% deposit when they give you a mortgage although 90% loans are becoming more common (even for a second mortgage). You always need a further 10% of the property price to cover fees and taxes (registry, notary and ITP tax) when you buy a Gran Canaria property.
Most Spanish banks also add things like life insurance and home insurance to your mortgage. You are not obliged to use your mortgage provider’s insurance. However, it does maintain goodwill if you do. You can always change insurance providers after a year.
If you have just arrived in Gran Canaria, the banks don’t approve mortgage loans until you have been resident on the island for 12 months. You also have to provide a credit report from your home country.
Getting a non-resident Gran Canaria mortgage
The only significant difference between resident and nonresident mortgages in Gran Canaria is the deposit. Non-residents need a 30% deposit (plus the 10% for fees and taxes).
Non-residents need a credit report from their home. If you apply for a joint mortgage with a spouse you often need an official translation of the marriage certificate.
What you need to get a mortgage
Each bank has its own requirements when it comes to documentation but all of them require the following…
- National photo ID document and copies (passport, identity card)
- Three to six months of bank statements on paper
- A contract of employment and/or other proof of income
- Three years of tax returns (from country of fiscal residency)
- Documentation showing the repayments of any other mortgages or loans you have
- Spanish tax declaration for the previous 12-months (for residents)
- Credit report from your home country (non-residents and new residents)
How much can you borrow in Gran Canaria?
Your mortgage repayments must not exceed 30% of your monthly disposable income (minus loan or mortgage repayments).
For buy-to-let property or holiday homes, Spanish banks don’t count potential future income. The same applies if you up-size and plan to rent out your original property
Getting a fast mortgage
Preparation is important but sometimes you just need to apply for a mortgage at the last minute.
You can do it via a good estate agent who knows which banks are quick and has long-term relationships with their staff.
Many estate agents also work with specialist mortgage companies that are more agile than High Street banks.
In my experience mortgage brokers, especially those that charge a set fee for making applications are no more effective than doing it yourself. In fact, since they are an added layer of paperwork, they are often slower and more prone to delays.
If you need a fast mortgage in Gran Canaria, please get in touch as I can often help thanks to my long-term contacts in the most efficient local banks.
Mortgage interest rates in Gran Canaria
All mortgage interest rates in Spain and Gran Canaria are calculated using the Euribor (Euro Interbank Offered Rate used by banks when they lend each other money). It is the European equivalent of the LIBOR rate used in the UK and USA. Note that it rises and falls independently of the official European Union Interest Rate.
Spanish banks show their variable mortgage interest rate as Euribor plus a percentage. It’s written as ‘Euribor más X%’.
You will find that different banks offer different interest rates; another good reason to apply to several banks.
The Euribor base rate is currently very low and Spanish banks can’t put a floor in their mortgage contracts.
If you value long-term security, consider a fixed-rate mortgage when you buy a Gran Canaria property in 2020. Higher initial repayments are offset by protection against long-term rate rises.
Mortgage strategy for 2020 buyers
Here’s how you make the mortgage application process as simple as possible and improve your chances of getting an attractive and timely quote from the banks.
- Apply at least three banks; a national Spanish bank such as Santander or La Caixa, an online bank such as ING Direct, and a smaller Spanish bank such as Sabadell or Bankia.
- Also, consider a specialist mortgage provider that is independent of the retail banks.
- Get an estimate or mortgage preapproval so you have a good idea of how much the banks will lend you.
- Have all your paperwork, both on actual paper, and stored online for easy access (in Google Drive, for example).
- Keep talking to the banks you apply to so that you can give them any extra paperwork they need as fast as possible.
- If your Spanish isn’t excellent, get help from a trusted estate agent or qualified adviser.
- Pay for a valuation (tasación) if you are in a hurry as banks can take a while to organise them. Choose a valuation company recognised by all the banks you apply to.
- Have your deposit in a Spanish bank account in advance to prevent delays.
Legal changes to Spanish mortgages in 2019/2020
A legal dispute in Spain about who pays the taxes and fees on mortgage documents has now been resolved.
The banks have always insisted that the buyer has to pay them but the courts ruled that the bank should.
However, in November 2018 the Spanish Supreme Court ruled that the property buyer has to pay the largest of these taxes; the impuesto de actos jurídicos documentados (documented legal acts tax).
This saved the Spanish banking system from paying back five billion euros in ADJ taxes to its mortgage clients.
However, the Spanish Government changed its rules the next day so the banks will have to pay ADJ for all future mortgages.
Planning to buy a Gran Canaria property? Please feel free to email or phone me if you have any questions about the process. Or, just ask a question using this form and I’ll reply ASAP (almost always within 24-hours).