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Do I need a mortgage?

Obviously, the advantages of taking a mortgage in Spain include being able to spread your repayments over a long period, thereby allowing you to secure a property that you would otherwise have been unable to afford. Lenders will then charge borrowers a rate of interest which is repayable with each instalment.

The alternative (if available) is to finance the purchase from cash. The advantage of this is that you would pay off the cost in one payment and would not be exposed to the costly interest repayments. However, your cash would be ´tied up´ in the property and would not be available to generate interest as normal savings would.

Once the pros and cons have been examined, and it´s decided that a mortgage is required, you will then need to decide on which mortgage option to take, and the first question you may ask is:

"Should I take a mortgage in Spain or in my home country?"

If you have an existing property in your home country and its value exceeds the mortgage upon the property, you may choose to opt to release a further sum of money or release equity from the property in order to then pay towards your Spanish property. This could be useful if you are able to do this with a low-cost product, but you will then need to transfer this sum to Spain, so if you are outside the euro-zone, remember to take note of the exchange rate.

Spanish mortgages generally attract set-up fees which can seem quite costly to overseas buyers. This is due to the fact that a mortgage in Spain is attached to the property and so attracts its own fees such as Mortgage Title Deed tax and notary fees, in addition to the usual opening and arrangement fees. However, Spanish mortgages are generally ´cheaper´ in that they are based on a lower interest rate starting-point.

Remember also that you can only obtain a Spanish mortgage once a property is completed. Therefore if you are looking to purchase off-plan (a property yet to be completed), you will need to finance the staged payments during construction from other sources. Many buyers choose to re-mortgage their main residence in their home country to finance these part-payments, before taking a Spanish mortgage upon completion of their property in Spain.
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