Getting a Spanish euro mortgage is more complicated if your main source of income is in a foreign currency, but a mortgage broker can help you navigate this complexity, and find a solution to the challenge of getting a Spanish mortgage in Euros with an income in another currency.
Your income constitutes one of the major factors in getting approval for a mortgage anywhere. Lenders are keen to assess your financial status, and analysing your source of income is a good way of doing it. Spanish lenders are no exception. As a general rule, banks in Spain look at your net monthly income and allocate 30 to 40% of it to pay for your worldwide debts, including your Spanish mortgage
But what happens if your monthly income isn’t in Euros? In this case, certain factors come into play and some of them can be a challenge to overcome. Almost always, these obstacles arise because Spanish lenders perceive a higher risk of default on repayment.
These challenges include the following:
Spanish mortgage legislation introduced in 2019 allows non-Euro earners certain currency rights. For example, suppose the value of their currency drops by over 20% against the Euro. In this scenario, these borrowers have the right to request the transfer from their Euro-denominated currency to the currency of their earnings or assets.
The change to another currency-denominated mortgage from Euros is subject to certain conditions, but even so, Spanish lenders regard this change in legislation with caution. Many see it as a high-risk factor and as a result, are reluctant to lend to borrowers whose earnings or assets are not in Euros.
As we’re all aware, currencies are subject to considerable volatility and exchange rates rise and fall, sometimes like yo-yos. For instance, an economic and political event such as Brexit can add or subtract considerably to a currency’s value.
Spanish lenders are not immune to the rollercoaster nature of currency exchange, and this affects their perception of mortgage applications from borrowers earning in a currency other than Euros. Since the new legislation was introduced back in 2019, all banks have now restricted lending to borrowers earning in certain currencies.
Currencies generally considered to be acceptable are Sterling, US and Canadian Dollars, Swiss Francs, Norwegian Krona, Swedish Krona and Danish Krona. There is one lender that won’t lend to US Dollar earners for regulatory reasons. Regarding other currencies, they are more likely to be considered as volatile in relation to the Euro. However, there are potentially still options for those earning in Hong Kong Dollars, Singapore Dollars, Australian Dollars, New Zealand Dollars and some other currencies.
Another challenge facing Spanish mortgage applicants who earn in non-Euro currencies comes in the form of geopolitics. The most recent example is Russia’s invasion of Ukraine. In the light of this war, some lenders in Spain are now reluctant to give mortgages to borrowers whose earnings are in Romanian Lei because of the perceived geopolitical issue in eastern Europe. The political tensions in Hong Kong have also made lending to Hong Kong Dollars earners more problematic.
How to overcome these obstacles
At Mortgage Direct, we face these challenges for our clients on a daily basis. However, our long track record of working hand-in-hand with Spanish lenders has shown us that the obstacles can be overcome with experience and expert market knowledge.
Case study 1 – earning in Mexican Pesos
For example, we look for an alternative purchase vehicle such as a Spanish limited company. This was the solution for a client earning in Mexican Pesos who bought the property through the company. As a result, the mortgage application was successful.
Case study 2 – earning in US Dollars
Or we apply our in-depth knowledge of lenders in Spain to source the one who accepts earnings or assets in a non-Euro currency. In almost all cases, at least one is prepared to offer the loan.
We have applied this practice effectively over the years and had particular success with American buyers. In many cases, we have sourced loans for 20 to 25 years at very favourable fixed rates.
Can I use foreign income to qualify for a Spanish mortgage?
So the answer is, yes, you can use foreign income in a currency other than Euros to apply for a mortgage in Spain, but the application will be more complicated, and you will benefit greatly from the help of a professional mortgage broker like Mortgage Direct. Some banks in Spain will not lend to you without the help of a mortgage broker because it is too complicated for them to deal with alone.