Overpaying for mortgage finance in Spain


The Spanish mortgage market can be confusing, and bewildering. There are lots of lenders offering many types of mortgages that are difficult to compare because they have different cost structures and terms.

Furthermore, the relatively complexity of mortgages as a product mean that you practically have to be an expert to unravel the small print, identify the hidden costs, and spot the best deals. In this respect the Spanish mortgage market is no different to other developed mortgage markets – where many people also pay more than they need to for mortgages. However, the fact that we are talking about Spain, where the language is foreign and things are done a bit differently, means that it is even more difficult to get at the best mortgages.

And there is one undeniable truth that applies to all mortgage markets: if you let a mortgage lender sell you an expensive and inflexible mortgage, they will. After all it is in their interests to do so (they will make more money).

So, for many Spanish mortgage lenders overseas clients are an easy touch. Although many lenders consider foreigners to be awkward clients (they don’t speak Spanish, and it is difficult to gauge their creditworthiness) they are also lucrative clients, because they have less insight into the Spanish mortgage market, and are easier to sell expensive and inflexible mortgages with high margins.

Most overseas borrowers don’t have the time, the language skills, the negotiation skills (in a Spanish context) or the understanding of how the Spanish mortgage market works to get the best mortgages on the market. In many cases an overseas buyer will only ask for one mortgage quote, probably from the bank or broker recommended by their estate agent (never a good idea) and then take it. This is not the way to get the Spanish mortgage that best suits your requirements at the best price. It is also the reason why most people may more than they need to for their Spanish mortgage.

A word of warning on ‘bundled mortgages’. These are mortgages offered with properties sold off-plan by developers. Buyers are given the option of taking over the developer’s mortgage (an option known in Spanish as ‘subrogar’), potentially saving money on mortgage set-up costs. This may be a good solution, but buyers should also be aware that this is sometimes a way of selling expensive and inflexible mortgages to unwitting buyers. Buyers are not obliged to accept a bundled mortgage when buying off-plan on a new development, and are advised to at least check if there is a better mortgage available. Note that developers in Spain often save mortgage cancellation costs when buyers take over their mortgages, which is why they often put pressure on buyers to do so. It is illegal for developers to pass on mortgage cancellation costs to buyers, though that doesn’t stop many of them from trying to do so.