100% mortgages in Spain

What’s the catch?

100% mortgages in Spain

When you’re buying property in Spain, most banks will typically ask for a 30% deposit, so it’s natural to get excited by the prospect of a mortgage that asks for none at all. But what should also be natural is to ask yourself the following question: with a deposit of 30% being the norm, why am I being offered a 100% mortgage?

It sounds like a dream only Spain could offer: a brand new home in the sun, complete with a pool and a nearby golf course, and you’ve not even had to reach into your own pockets. The first step in discovering why you’re being offered a 100% mortgage is to investigate the property on offer.

Banks desperate to offload

Nearly all the properties you’ll find on your quest for zero down payment will have been repossessed by the bank from developers who went bankrupt. This could have happened due to cash-flow problems, or, more alarmingly to prospective buyers, because the property couldn't attract renters.

There are two main reasons why this can happen, neither of which bodes well for you: either the property is poorly located or it is in a poor condition. If this is the case for the property you’re looking at it, it’s unlikely that you’ll have renters chomping at the bit to move in either, making the attractive mortgage look like a pretty poor investment.

Fool’s gold

It’s a lot easier to get rid of a bad investment to someone who doesn’t know any better, and who better than a gullible foreigner who hasn’t done their homework? Those who know about the Spanish property market are unlikely to sniff at the type of units on offer, and that’s exactly why the banks offer 100% mortgages: to entice (typically) British buyers from abroad in a bid to offload the properties.

These units are typically sold unseen, and as Survey Spain  - a network of chartered surveyors - say, “there’s no doubt there’d be quite a few takers for Spanish property like this with 100% mortgages - the only problem is that our reputation would be ruined within a year because they are terrible investments”.

No sell-on value

As many properties like this are on the market, it’s unlikely that the value of any one will increase significantly.

So what are you left with? An empty property collecting no rent which is not increasing in value and a large mortgage with a substantial interest rate. A 30% deposit is now starting to sound pretty sweet.

Further reading

Does this article help?

Do you have any comments, updates or questions on this topic? Ask them here: