I’ve recently been looking at new builds around Madrid and I’m overwhelmed by the choices. But what’s even more of a headache than picking a floor plan is the mortgage process. I’ve visited several banks and consulted with some agents, so I’ve put together what I’ve learned about the requirements for a new build mortgage to share with friends on the same journey. This information is mainly based on my conversations with Santander, BBVA, and CaixaBank, so it might not be exhaustive. Please feel free to add your insights or make corrections!
Core Requirements: Status and Income
When approving a mortgage, the first things banks look at are your residency status and repayment ability. These two factors directly determine how much you can borrow, or if you can get a loan at all. For us foreigners, the key is whether we have legal residency in Spain.
| Residency Status | General Loan-to-Value (LTV) Cap | Notes |
|---|
| Resident | 80% of the property value | Requires stable employment and proof of income |
| Non-resident | 60%-70% of the property value | Stricter assessment, interest rates for a new build mortgage may be higher |
The “property value” here usually refers to the lower of the bank’s valuation or the purchase price. This is an important point to note, especially with new builds, as the valuation can sometimes be slightly lower than the market price.
Down Payment and Loan-to-Value Ratio
Based on the LTV ratios above, the down payment is easy to calculate. If you are a resident, the bank will lend you up to 80%, meaning you need to prepare at least a 20% down payment. But don’t forget, on top of the property price, there are significant taxes and fees, mainly the IVA and AJD for new builds, plus notary fees, registration fees, etc. Therefore, it’s wise to have about 30%-35% of the total property price saved up. For non-residents, you’ll need even more cash on hand due to the lower loan amount.
The Importance of Proof of Income
Banks need to be sure you have a steady and continuous income to cover the monthly payments. The most important documents they look for include:
- Permanent employment contract: This is the strongest proof. It’s much more difficult with a temporary contract.
- Last 3-6 months’ payslips (nóminas): To prove your current income level.
- Previous year’s personal income tax return (declaración de la renta): This is the official proof of your total income for the past year and is very persuasive.
- Working life report (Vida Laboral): This shows your entire social security contribution history and proves your employment continuity.
The bank will calculate your debt-to-income ratio. Generally, your total monthly debt payments should not exceed ideally be no more than 30%-35% of your net monthly income.
The process for a new build mortgage is similar to that for a pre-owned home, but it can be more straightforward since you’re dealing directly with the developer. The key is to have a healthy financial situation and all your documents in order. I’m still in the preliminary research phase and plan to formally apply next month, so I’ll post an update then. I hope this information is helpful, and I welcome tips from veterans who have already gotten on the property ladder—for example, which banks offer better interest rates or have faster approval times. Wishing everyone success in finding their dream home!
