This is where things get real-real. You found your dream home - check. Now you have to finance your dream home - uhhh, how do I do that? This purchase process is from the following perspective: 

A Spanish property, being purchased by an American couple, 

living and working in another foreign country - Kuwait. 

While our experience is probably unique, some of the following information could be useful to individuals who are interested in buying property in Spain or abroad in general.  

Mortgage

Spanish property prices are great; far better than anything you’ll get in California! The problem is financing. Because of Spain’s tough economic history, banks reduce their risk by limiting financing to a percentage of the property’s appraised value. 

In 2018, we found that Spanish banks were only offering 65% financing; meaning we would have to cover the remaining 35%. In other words for a 100,000€ property, the Spanish bank would finance 65,000€ and we would have to cover 35,000€. We were assured this was normal and not because we were foreigners. Please note that you may find better financing options - up to 100% - with new developments and bank owned properties.    

We were able to cover the remaining 35% with savings and a Kuwait bank loan. Our bank in Kuwait - National Bank of Kuwait (NBK) - offered great loan rates. 

Quick Note

Islamic banks, that are sharia-compliant, are not allowed 

to charge interest (riba) on mortgage loans.   

As working residents (meeting certain requirements), we were able to access 15,000KD or roughly $50,000. Instead of paying interest on outstanding principal, a fee of roughly $2,000 was applied to the overall repayment schedule. So basically, we only paid a total of $2,000 in interest and service fees on the life of a $50k loan - incredible! 

Required Documents

For our Kuwait loan, NBK required letters of employment and bank statements from the last 6 months. The process was rather simple as our parent-employer and bank have an established  relationship; NBK opens accounts for all teachers for direct deposit.  

For our Spanish mortgage, we utilized a mortgage broker - International Mortgage Solutions (IMS). The requirements to obtain a Spanish mortgage were typical to that of mortgages in the States. IMS required documents as follows: 

• Domestic Bank Statements 

• Foreign Bank Statements

• Domestic Credit Report

• Foreign Bank Clearance Letter

• Employment Contracts  

• Pay Slips (6-months)

• Copy of Passports 

Most of the required documents above are straight forward. The Foreign Bank Clearance Letter functions as a credit report in countries that do not have this service. Basically, the bank will certify that you do not have any outstanding loans.   

Quick Note

Luck for us, we were able to provide the Kuwait bank clearance letter before obtaining our Kuwait loan. If we would have obtained the Kuwait loan before our Kuwait bank clearance letter, we would not have been able to pursue our Spanish property.  

In order to purchase property in Spain you will require a Número de Identidad de Extranjero (NIE). NIEs are required for foreigners to purchase property in Spain; the government links the NIE to property for residency purposes, property taxes, and social security. Typically, a Spanish lawyer could obtain your NIE, but we requested them through the Spanish Embassy in Kuwait.

Quick Note

IMS, more specifically Ravena, were incredibly helpful in the mortgage process. She was extremely patient and informative during the entire process. We would recommend her services to anyone looking to obtain financing for their Spanish property. We have included her contact information below for your convenience. 

International Mortgage Solutions

Ravena Rhys-Jones

International Mortgage Specialist for Spain

ravena@imsmortgages.com  

One of the last documents obtained before finalizing the Spanish mortgage was the Nota Simple Informativa. The document certifies the seller is the actual owner, that the property does not have any liens, and the property is not misrepresented in size or description. Once this is complete, sit-back and relax until you have to make your wire transfers.   

Legal Procedures

We procured the services of a Colomer Lawyers in Oliva to handle all legal aspects of the purchase. We worked with Joaquin who spoke English very well and was really friendly. 

Colomer Lawyers

Joaquin Colomer

Lawyer (Abogado)

joaquin@colomerlawyers.com   

The first step was to establish a Power of Attorney (POA) with Colomer Lawyers. The POA would allow the lawyer to act on our behalf in the purchase of the property. In order to make the POA valid, we were required to make an appointment with the Spanish Embassy in Kuwait for a notary to certify the POA. Once that was complete, we did not have much to worry about. 

Quick Note

During the walk-through of our future home we casually asked if the furniture would be left behind. Nothing great, but something to work with. Given the seller moved back to the U.K. due to medical issues, the realtor said yes. Upon receiving the keys and moving in, we found most of the good furniture and all of the kitchen appliances and light fixtures gone. The first night was memorable to say the least; my 8-month pregnant wife and I had to sleep on a dingy, hot fabric couch. We called our realtor and she was stunned. We called our lawyer, but unfortunately there was nothing anyone could do. To circumvent this situation, make sure to create an inventory list of all furniture, appliances, and fixtures and have your lawyer include this legality into the sales agreement. While frowned upon, this is apparently a common occurrence. You have been warned!   

Please note, the purchase process (the mortgage, required documents, and legal procedures) as described above was not necessarily linear. Actions and requests from the broker, lawyer, bank, and relator were categorized and explained to the best of our ability.     

Wire Transfer

One of the most aggravating parts of the experience was the wire transfer. Not because it’s difficult, but because of the real losses in exchange. There are three components that you should really consider in your wire transfer. 

1. Wire Transfer Fees

2. Exchange Rates 

3. Other Fees

To review, the property was financed with three different pools of funds and currencies: 

• Domestic Savings in United States Dollar

• Kuwait Bank Loan in Kuwaiti Dinar

• Spanish Mortgage in Euros 

The Spanish mortgage funds stayed in our Spanish bank account until the purchase - easy, done. One stipulation of our Spanish mortgage was that supporting funds must come directly from our country of nationality - USA. As such, we had to wire transfer our Kuwait bank loan funds to our domestic USA bank account and then wire transfer that lump sum to our Spanish bank account for purchase.

For reasons discussed above, our Islamic bank did not place large fees on our wire transfer. We incurred a standard 5KD or $15 charge for any global transfer, no matter the amount. The only additional step was increasing our daily transfer limit which was as simple as an online request. This was not the case for our domestic USA bank. Significant losses can occur from wire transfer fees, exchange rates, and conversion fees; banks are notorious for hidden fees. For our domestic USA bank account to Spanish bank account wire transfer, we used Moneycorp to reduce the unfriendly wire transfer fees, exchange rates, conversion fees, and other hidden fees. 

Quick Note

Banks use wire transfer fees, exchange rates, and other fees to make money from transfer and exchange transactions. Please see the examples below for a basic understanding of how banks charge for transfer and exchange transactions. 

1. A bank will charge you a flat fee or a percentage of an amount transferred as a wire transfer fee. 

2. Say the market rate is 1 USD exchange for 0.85 Euros. The bank will only exchange 1 USD for 0.80 Euros; the bank gain of 0.05 Euros per 1 USD is the hidden cost of the bank’s exchange rate.    

3. Other fees can range from intermediary banks on international wire transfers to incoming wire fees from the receiving banking account. 

   • Tip: We always select the beneficiary account (receiving bank) to pay all fees because our receiving banks would always charge a fee regardless.  

Specializing in global currency exchange and international payments, Moneycorp is a great alternative to using your bank for wire transfers. I do not remember the amount saved, but I do remember it was well-worth setting up an account for the one-time wire transfer. Do yourself a favor, save some money, and use an alternative wire transfer option. 

Actual Costs

Now that the process has been exhausted, lets get to hard numbers. The major costs related to the purchase of our Spanish property were roughly as follows: