Mortgage Loans and their possible issues in Spain

Spain is a country that leads other countries in mortgage lending. Lending activity in Spain is highly regulated and governed by the respective loan laws. Mortgage lending is also governed by the Spanish mortgage market law that facilitates Spanish citizens’ access to better accommodation.

The process of mortgage lending and closing differs from country to country. In Spain, it is a legal requirement to hire a notary for a mortgage closing.

Spanish Mortgage Loans

A mortgage loan is a type of loan that you can apply from the regulated banks in Spain for refinancing a home. Mortgage loans in Spain are the most preferred loan when it comes to buying a house. However, in Spain you can find two types of mortgage securities or bonds that are as follows:

The Cédulas Hipotecarias (Spanish Mortgage Bonds)

These represent several Spanish mortgage loan options with some specific features. One of the key points about these is that they cannot exceed 90% of the value of the mortgages. Mortgage bonds are just like a debt to the credit institution or bank.

Spanish mortgage-backed securities, SMBS (The bonos de titulización hipotecaria)

According to Spanish law, the mortgagers can invest in Spanish mortgage-backed securities by using the pass-through model. Under this model, the securities are easily traded and can be used as an easy mode of funding by the banks.

Parties to a Mortgage Loan

There are two parties to a mortgage loan that are discussed below:

Lender: A lender can be a bank or any other private financial institution that is authorized to lend mortgage loans. Every lender in Spain has some specific regulations that are compulsory to be met by the borrowers.

Borrower: A borrower is the one who seeks the mortgage loan to buy a house. Sometimes a borrower can jointly apply for a bigger amount of loan along with another co-borrower.

Working of a Mortgage Loan?

Applying for a mortgage loan is easy as most of the banks are facilitating the customers with the mortgage loan through online application. Once your application for a mortgage loan is accepted, you are directed to the verification process conducted by the financial institutions.

When you get the money deposited in your bank account you are bound by the regulations imposed on you by the bank. A mortgage loan is usually paid back by the borrower at a pre-mentioned rate of interest. The rate of interest varies with the type of mortgage loan. It will be necessary to have all the documentation according to Spanish laws and regulations.

Final Words

The process to get a mortgage loan in Spain starts with a long process of documentation. It takes around 4 to 6 weeks to get a mortgage loan in Spain. The rules for obtaining a mortgage loan are more intense for non-residents as compared to the residents of Spain. For example, a foreigner must get a unique identification number i.e., NIE to apply for a mortgage loan in Spain.