(La hipoteca)

Buying a home of your own is very expensive. A buyer's savings are often not enough, in which case it is necessary to apply for a mortgage (Hipoteca) from a bank.

Very few banks will give you a mortgage that covers the full price of an apartment. It is normally possible to obtain 80% of a home's appraisal value (Valor de taxació) , and you, as the buyer, have to provide the remaining 20% in the form of a non-returnable deposit (a sum called an Entrada in Catalan).

Remember that buying an apartment, particularly if you need a mortgage to do so, generates expenses that can add up to around 10% of the price of the home (valuation, notary, bank fees, transfer tax, etc).

If you do not have enough money to pay the deposit mentioned above, you may be able to meet the expense through a personal loan. For the bank to accept such conditions, you will need to provide a guarantee from another person (usually a relative) who is willing to take responsibility for repaying your mortgage if you find yourself unable to do so in the future.

Some people use black money (money not declared to the government, so as to avoid paying taxes on it) to pay their non-returnable deposit. Doing so is illegal and inadvisable, as it can lead to considerable fines from the authorities. The emergence of black money can result in the tax office carrying out inspections and applying fines. Anyone (including banks and building societies) who becomes aware of undeclared income from activities presumed to be illegal is required to immediately inform the competent authorities (police, tax office, etc.), who will begin investigations that could lead to criminal proceedings.

It is very important to find out about and compare the financial conditions that the different banks and building societies offer (interest, processing fees, notary's fees, tax, etc.).

(La taxació)

Before granting a you mortgage, a bank will send an expert from a valuation company approved by the Bank of Spain to view the home you want to buy. The expert, whose fees are payable by you as the buyer, will produce a valuation report (Informe de taxació) , which is compulsory and establishes the home's market value, its location and its condition. The bank decides how much money to loan you on the basis of such a report.

Bank criteria for granting mortgages
(Quins criteris segueix el banc a l'hora de concedir una hipoteca)

When granting a mortgage, the main criterion that banks and building societies take into account is the applicant's saving capacity. Your saving capacity is not your monthly income, but the amount you have left over at the end of a month, once all your regular monthly expenses have been paid. That sum determines your borrowing capacity, which corresponds to the monthly value of your mortgage. Rent payments are not included in your regular monthly expenses, as you will no longer pay rent once you obtain a mortgage.

Banks will also check to see whether you have other loans, how many credit cards you have and how stable your job is.

Your borrowing capacity should be roughly equivalent to 45% of your income after tax.

When applying for a mortgage, you will need to provide the following documentation:

  • Your employment contract. You are more likely to be granted a mortgage if you have a permanent contract. In the case of self-employed workers (Treballadors autònoms) , the bank will look at the amount you have earned over recent years.

  • Your most recent wage slips and income tax returns.

  • Additional personal guarantees (normally from parents, other relatives or people who can vouch for you) offering assurances that you are able to make monthly mortgage repayments.

As you can see, you need to be sure that your job is stable and that you have other sources of financing, in case something happens to you and you have no income for a while. This is a major risk that you must not ignore.

If a mortgage is granted to more than one person, each of them is considered to be the owner of the corresponding proportion of their home. Likewise, the bank and the law regard each of them as being responsible for repaying the loan.