The financing application is a procedure that runs parallel to the purchase process and consists of several phases: starting with a preliminary assessment of the applicant’s financial situation by the bank or broker, followed by an appraisal of the property by a recognized appraiser, formalization of the binding offer for the bank, a reflection period for the borrower, signing of the notarial transparency document, and formalization of the loan through a public deed.
It is relevant to coordinate this process with the purchase process so that the various milestones occur smoothly (obtaining the Tax Identification Number -NIE- sufficiently in advance to formalize the offer, obtaining an appraisal report prior to signing the private purchase contract, etc.).
There are two main limits for determining the loan amount: the first is the purchase price, and the second is the appraisal value. Generally speaking, if the buyer is a non-resident and the property is a second home, the loan amount will not exceed 70% of the lower of these two variables:
Example 1: Purchase price 500,000 euros and appraisal value 570,000 euros. The maximum loan amount would be 350,000 euros (70% of 500,000 euros).
Example 2: Purchase price 500,000 euros and appraisal value 480,000 euros. The maximum loan amount would be 336,000 euros (70% of 480,000 euros).
The mortgage loan also takes into account the applicant’s age. After age 70, financing options are very limited, so the closer you are to that age, the shorter the loan repayment period is and therefore, the higher the monthly installments will be.
When making an offer to buy a property, it has to be kept in mind that the bank only finances the purchase of real estate, so only the value given to the property will be considered for these purposes. Any amount the buyer pays for furniture or agency fees, for example, will not be considered as part of the financing request.