Bank of Spain Mortgage Guide

The Banco de España (Bank of Spain) publishes an official mortgage guide designed to help borrowers understand the implications, costs, and risks associated with obtaining a real estate loan. In Spain, mortgage lending is strictly regulated, especially following the implementation of Law 5/2019 regulating real estate credit contracts.

Key Guidelines from the Bank of Spain

1. Loan-to-Value (LTV) Limits

The LTV represents the ratio of the loan amount to the appraised value of the property. The Bank of Spain recommends a maximum LTV of 80% for primary residences and 70% for secondary residences (holiday homes). Non-resident buyers are typically capped at 60% to 70% LTV.

2. Debt-to-Income (DTI) Ratio

Borrowers are advised not to allocate more than 30% to 35% of their net monthly income to pay off debt obligations (including the new mortgage payment and any existing loans).

3. Pre-contractual Transparency

Lenders must provide two critical documents at least 10 days before signing the mortgage deeds:

• FEIN (Ficha Europea de Información Normalizada / European Standardised Information Sheet): This acts as the formal, binding offer from the bank, detailing interest rates, repayment periods, and commissions.
• FIAE (Ficha de Advertencias Estandarizadas / Standardised Warning Sheet): This explains clauses, risks (such as multi-currency structures or floor clauses), and indices used (such as Euribor or IRPH).

4. Allocation of Mortgage Expenses

Under Law 5/2019, the bank pays for the notary fees, land registry fees, gestoría fees, and the AJD tax (Actos Jurídicos Documentados). The buyer pays only for the **property valuation (tasación)** and their own copies of the deeds.