Many people in Spain want to buy a home, as buying and becoming a property owner is still more common than renting property. If it is financially wiser to buy than to rent an apartment, you should check your options on how to go about it. Of course, the majority of home owners need a bank to help them out by granting them a mortgage, as buying property does not come cheap.
And as many people wonder what banks require when it comes to granting a mortgage, today this blog article by ShBarcelona focuses on exactly that.
Related article: Choosing a Bank in Barcelona
What banks require to grant you a mortgage
If you have found the house of your dreams, and you need to apply for a mortgage in order to be able to pay for it, it is important to keep a few things in mind to know your possibilities with a bank.
When a bank considers granting you a mortgage, one of the key requirements is having a stable job. This generally means you must have an indefinite contract and a certain length of service. This is one of the most important elements for a bank to assess your creditworthiness.
- If you do not have an indefinite contract, there are still options. If you have other properties or a certain amount of money in the bank, a mortgage may still be granted. Also having a guarantor can help negotiations with the bank.
- Another important factor is your salary. It should be sufficient to cover the cost of the mortgage you have requested. As a rule of thumb mortgage payments should never exceed 30% to 40% of your expenses. If there is not enough income, financial institutions will refuse to grant a mortgage.
- The economic crisis that started in 2008 has led to banks rarely granting the full 100% of the mortgage on a property.
- As a result, having savings is mandatory for a bank to consider approving your mortgage application. When you know beforehand that a bank only grants up to 80% of the total amount needed, you can do the math yourself to come to the conclusion you need to have saved at least 20% of the property price itself, and do not forget to take all the extra costs into account (valuation, notary, property registry, etc.).
Related article: Buying Housing In Barcelona
If a bank assesses you do not meet the minimal requirements for granting a mortgage, which might be for a variety of reasons, they may require you to provide extra guarantees. This is when guarantors come in handy: family members or other people you trust. Guarantors already have property, and this means the bank is always assured it can collect its mortgage payments, so they will have no problems granting you the mortgage. Guarantors should always thoroughly analyse the details of the risks they take, as circumstances may influence their assets.
- If you want the bank to grant you a mortgage, it is of the utmost importance not to have any other credit obligations, such as personal loans or registered debts.
- Your age also matters. Financial institutions require that people applying for a mortgage are not over 75 years old, and of course, they should be of legal age.
If you want to find out more about applying for a mortgage, we advise you to consult different banks. Although everything that is written above is what is generally required by banks, some can be more flexible than others.
Have you applied for a mortgage in Spain? What advice do you have?
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