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?
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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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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