As we stay active longer, we’re also retiring later in life. In many cases, people continue to work well into their 70s, but how does this affect the maximum age for a mortgage in Spain? Can you still take out a home loan once you’re 65 and, if so, how long will its term last?
We tend to associate mortgages with a younger demographic, those starting on the property ladder in their 30s and early 40s. However, home loans are by no means their exclusive territory and, increasingly, it’s the over 50s who are looking at mortgages.
“The reasons are multiple,” says Katherine Walkerdine, a founding partner at Mortgage Direct. “They might be upsizing, buying a second home or investing in property and need a loan to finance part of their purchase.”
As a result, the maximum age for a mortgage in Spain has become a hot topic and we’ve had a flurry of enquiries from buyers looking for an answer.
Is there a maximum age by law?
The first point to bear in mind is that Spanish legislation does not fix the maximum age to take out a mortgage. In practice, however, most banks will limit the age a borrower can reach by the end of the term and it’s generally 70 or 75.
We do have options for older applicants, where the age limit by the end of the term is age 80 and the term can be as low as 5 years. Clearly, pension income will be important for such applications.
What does this mean in terms of repayments?
As a general rule, the older you are, the shorter the term and the higher the monthly repayments. The repayments for a 10-year loan taken out by a 65-year-old are therefore more expensive than those for a 20-year loan, for a 55-year-old.
Is the maximum age for a mortgage in Spain different for non-residents?
For Spanish fiscal residents, 30-year loans until you’re 80 are possible, although rare. For non-residents, the usual conditions are a 20-year term until you’re 75, although 30 years is possible under certain circumstances.
What about income requirements?
The official retirement age in Spain is 67; consequently, banks assume their clients will retire at this age even if they say they intend to work for longer. If you’re looking for a mortgage where the term takes you past age 67, you’ll need to meet the bank’s affordability criteria taking into account both your employed or self-employed income (if you’re still working) and, more importantly, the anticipated retirement income from age 67 if you were to retire. You will need to provide proof of retirement income in the form of a pension or similar. The proof assures the bank that an applicant has the means to continue making mortgage repayments when they stop working.
What are the affordability requirements for older mortgage applicants?
Again, criteria vary depending on the bank, but usually the financial entity will apply the same one-third requirement to a pensioner as it does for an employed or self-employed applicant. In practice, this means that the total of your existing debts, significant expenses (rent and alimony, for example) and new repayment on the Spanish mortgage added together must not exceed more than one-third of your net monthly pension.
Are there any additional requirements?
In some cases, banks ask older mortgage applicants for extra guarantees. They may require mortgage guarantors, which are not always easy to provide. However, we’d reiterate that these requirements vary from bank to bank and not all providers request them.
In conclusion, we’d highlight that, in general terms, a 65-year-old won’t get a mortgage for longer than 10 years and may face additional qualifying requirements. However, as is always the case with mortgages, each application is different and ultimately depends on your mortgage broker securing the best deal for your circumstances.
Don’t hesitate to get in touch if you want to discuss your mortgage needs in Spain.