Do you want to buy a second home on the coast of Spain, either for investment purposes or as a holiday home? If that is your case, we teach you how to do it in the most efficient way.
Spain is one of the countries where the largest number of people acquire their second residence. However, before embarking on a second home purchase, it is important to understand the financial requirements and considerations, particularly when it comes to mortgages. In this article, we’ll explore the key things to look out for when buying a second home on the coast, and the requirements that banks often require.
Differences between first and second home
The “usual home” or first home, is the home that is acquired to reside in it permanently or habitually.
When you already own a home, and you buy a second one, either for investment, vacation home, or both, we refer to a “second home”
In case you need to apply for a mortgage for your second home, banks do not usually cause problems, even for foreigners. Contrary to that for the first home, since a non-resident will not be able to request a mortgage for their habitual home, only for their second home.
Requirements for the mortgage in case you want to buy a second home are:
- Job stability and economic solvency: Banks usually require proof of job stability and ability to pay. Generally, the latest pay stubs, tax returns and bank statements will be requested to assess the financial solvency of the applicant.
- Loan-to-value ratio (LTV): It is not like with the first homes that you can grant yourself up to an 80% mortgage, but in this case it can go down to approximately 60%. This implies that they will need much more savings.
- Additional guarantees: In some cases, especially if the applicant is a foreigner, banks may request additional guarantees, such as guarantees or life insurance.
- Age of the applicant: Some banks may have restrictions regarding the age of the applicant at the end of the loan term. It is important to consult this aspect, since it may vary depending on the entity.
- Property appraisal: The bank will carry out an independent appraisal of the property to determine its current value and adjust the loan accordingly.
Is it profitable to have a second home?
The answer is that the profitability of having a second home in Spain depends on the location, the rental demand, the maintenance costs and the associated taxes. It is important to consider the location of the property, such as the coast, where there is high tourist demand. In addition, it is necessary to assess the rental demand in the area and the maintenance costs, such as regular maintenance and community fees.
Taxes must also be taken into account, such as income tax, IBI and ITP. The choice between long-term rental and vacation rental will also affect profitability. It is essential to be aware of regulatory changes and local regulations that may affect profitability.
In general, it is important to carry out a thorough analysis and seek professional advice before making an investment decision.
If you are interested, after reading the article on buying a second home in Spain at Elisa Properties we have a wide range of home options both on the Costa del Sol and the Costa Blanca.
What are you waiting for to buy a second home?