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PROPERTY

How to get a mortgage in Spain if you don’t have a job contract

It can be difficult enough to get a mortgage in Spain, but what about if you're not a full-time employee? Can you still get a mortgage if you’re self-employed or if you receive passive income from within Spain or abroad?

How to get a mortgage in Spain if you don't have a job contract
A woman exits a branch of Spain's BBVA bank. According to Helpmycash.com, BBVA is one of only a few banks in Spain actively advertising mortgages for self-employed workers. (Photo by DANIEL GARCIA / AFP)(Photo by DANIEL GARCIA / AFP)

Spanish banks don’t typically look favourably on autónomos (self-employed workers) or those without a steady contract when it comes to granting a mortgage.

Even if they have fairly good revenue streams, they tend to see them as a bigger risk that low-paid contract workers.

That’s largely because self-employed workers rarely get paid the same amount each month, they don’t always know how much they’re going to earn each month and in a job market and economy as volatile as Spain’s can be, that doesn’t convince banks.

However, it is possible to get a mortgage with a Spanish bank if you don’t have a job contract, even though admittedly it can be tough to get, and you’ll need a lot of documentation to prove your case.

What factors will be in my favour?

Monthly earnings

Firstly, you’ll have to show high monthly earnings, even if you don’t earn the same amount each month. The bank must analyse the amount of risk you as a client pose, and if you can prove that you’ve maintained a high level of income for a long period of time, and it’s been consistent, it will play in your favour.

READ ALSO: Why mortgage payments in Spain could increase by up to €120 a month

Your type of business or stream of income

The type of business you have, the sector you work in or where you get your passive income can also play a big role in whether the banks decide to give you a mortgage or not.

Some industries are naturally seen as riskier than others, there’s even the chance that your field may not be understood completely by your bank manager. For example, if you make your money blogging or making YouTube videos, the bank may not completely understand how and where you get your money and therefore not be so willing to give you a mortgage.

According to Infoautónomos, the website designed to help the self-employed in Spain:In an ideal world, the manager would know the world of our business and could analyse the situation properly. The reality is that they usually have little idea of ​​how companies in our industry work”.

Therefore, explaining your business in a clear way with lots of evidence and documentation will help your case.

READ ALSO: How to rent a property in Spain if you don’t have a job contract

How long you’ve had your business for

It’s unlikely that banks will bet on someone who has only been self-employed or had their business for a couple of years.

You need to show that you can make your business a success over a long period of time and prove that you will do so in the future too. It also shows banks you can make a commitment and stick to it. This will prove that your business is resilient, possibly even through tough economic times such as the Covid-19 pandemic for example.

READ ALSO – Property in Spain: What you need to know before making a down payment

Agreeing to lower monthly payments

You’ll probably have to agree to a lower monthly mortgage payment than those who have a full-time contract so that the banks will know you’ll be able to cough up each month. Your payments can’t be more than 40 percent of your average monthly earnings.

This does mean though that you’ll be paying mortgage payments and the corresponding interest for a longer period of time.

No outstanding debts or loans

It’s important that you don’t have any outstanding debts or ongoing loans, this is also the case if you’re an employee with a fixed salary.

You will need to prove to the bank that you don’t already owe lots of money and that you’re a trustworthy candidate for one of their mortgages. 

A big deposit

Banks will typically only finance up to 80 percent of a property, so you’ll need to make sure you have a sizeable amount of money saved up as a down payment.

If you can get yourself an even larger deposit, bigger than 20 percent, this will definitely be looked upon favourably and put you in better standing as you’ll have to borrow less. 

A guarantor or guarantee

If the bank still thinks you’re too much of a liability you could try providing a mortgage guarantee (aval hipotecario) or a guarantor who will cover your mortgage payments if you are no longer able to pay. For many though, this will obviously be very difficult to find. 

What documents will I need to take to the bank and state my case?

According to Spanish bank BBVA, when requesting a mortgage loan: “you must be well prepared, with documentation that reflects, in the most detailed way possible, the income you have and the guarantees that can be provided”. They are reported to be one of only a few banks in Spain actively advertising mortgages for self-employed workers

The bank’s website states that you must provide:

  • A dossier with information about your business or where your money comes from with all the particular details about how much you earn, how long your business has been operational and how successful it is. It must also include information on client relations, what projects you’re planning for the future and the probability of them working out or not.
  • Your last year’s tax return and possibly ones before that too, showing the exact amounts you earned. 
  • A breakdown of all your accounts in detail, including incomings, outgoings, costs etc.
  • Proof of how much savings you have and how much you are able to save each month by showing your bank statements – both your personal bank accounts and your business ones if they are separate.
  • Receipts and proof of any loans you have, both personally or as a business.
  • A report on your working life, such as previous jobs you’ve had or previous businesses you’ve started. Essentially, you need to provide something similar to your CV so the banks can see what type of professional person you are. 

Any extra information you can provide on your business or your passive income will help. Remember, the more paperwork, the better. 

Other banks ask for similar proof and documents, but remember to contact each one beforehand in case they require anything extra. You want to go in as prepared as possible. 

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PROPERTY

How to contest the cadastral value of your Spanish property

The cadastral value and cadastral reference of a property in Spain affect various factors including how much yearly property tax and inheritance tax you'll pay. Here's how to change the valuation Spanish authorities give your home.

How to contest the cadastral value of your Spanish property

When it comes to taxes, everyone wants to know if there are ways to pay less. While it’s not always possible, there are certain factors that affect particularly taxes associated with your Spanish property – namely the cadastral value and the cadastral reference. But, can they be changed or rectified?

What is the cadastral value?

The cadastral value is applied to all properties in Spain. It’s the value applied to your property by the Ministry of Finance or Hacienda and serves as a tax base to determine how much IBI tax or Impuesto sobre Bienes Inmuebles you pay for example. This is a yearly tax for all those who own property in Spain.

READ ALSO: What is Spain’s IBI tax and how do I pay it?

The value will depend on the size of your property, the condition it’s in, the year it was built and the cost of construction, among other factors.

It differs from the cadastral reference, which is an estimate of the market value of a property and is used as a reference for the real estate market. It is also used as a tax base for inheritance and property transfer tax.  

How is it determined?

At the beginning of each year, the cadastral value of homes is reviewed, and as a result, it can increase or decrease. This is why your IBI bill can increase or decrease too. As a general rule, the cadastral value is usually much lower than the market price, but this is not always the case.

How do I find out the cadastral value? 

To know the cadastral value of a property, you must first know the cadastral reference. Then you can find the value in the corresponding public records online. You can find this reference on your IBI bills, as well as on your property deeds.

Once you have this you can go to the electronic headquarters of the Cadastre, and click on ‘reference value’. There you will find all the information about the cadastral reference and the corresponding cadastral value.

Even if you’re not the owner of a property, but want to find out the cadastral value of a property you’re considering buying, you can find it out here.

Can I change the cadastral value of my home?

Yes, it is in fact possible to change the value. If you believe that the cadastral value of your property is too high with respect to the market price of your home, you can request that it be reduced.

You may want to do this in order to lower your IBI bill or if you want to sell your property at a lower price than the market value.

How do I lower the value?

If you believe that you have a case for changing it, you can make a claim to the General Directorate of Cadastre, overseen by the Ministry of Finance. There are two different claims you can make:

  • The procedure for correcting discrepancies
  • The procedure for rectification of material and arithmetic errors.

Procedure for correcting discrepancies

This option is typically used when there is a large difference between the market price and the cadastral value of a property, as well as when there are errors or false data about the characteristics of your home.

To do this, you must go to the Cadastre office in your municipality or apply online at the Cadastre Electronic Headquarters.

Procedure for rectification of material and arithmetic errors

The second option is used when there are errors or incorrect urban planning information, which affects your home. Again you can do this in person or online. In this case, it will have a retroactive effect. If you have paid too much IBI in the past, then it should be returned to you if the application goes in your favour.

Can I change the cadastral reference of my home?

If the reference value of your home is higher than the market value, then you may be wondering if you can change the reference in order to lower your tax base.

Unfortunately, you cannot request changing this in the same way as you can with the cadastral value. But, the good news is that there is a way to challenge it indirectly.

To do this you will need to request an appraisal from a company approved by the Bank of Spain. If the result of this turns out to be lower than the reference, you can try to rectify your self-assessment tax return, providing the appraisal as evidence that you should be on a lower tax base. As mentioned above, this will only affect certain taxes like inheritance or property transfer. 

In order to approve this, the tax office will need a report from the General Directorate of the Cadastre who may be able to rectify the reference and provide a report to settle the matter.

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