Once you have found a Spanish property to purchase, you’ll probably need to decide how to raise finance for it. There are an increasing number of sources of finance within the UK which are willing to lend against a foreign property.

Here we cover the two general options that are available in Spain.

Financing from the developer – If you are buying a brand new property or ‘off plan, the developer will generally have the most attractive financing options to offer to purchasers. The paperwork will be standardised but you’ll want to check the terms and conditions carefully.

Check that the contract stipulates the initial payment, the number of the subsequent payments and when these payments will end. From the sum of these payments you’ll be able to see the true cost of the developer’s financing compared to other options.

Make sure you know what happens if you should miss a payment. Usually there will be provision for you to make a certain number of late payments and incur only a small penalty. Make sure that you are allowed to pay off the remainder of the contract at any time without incurring the total remaining interest.

Developers generally offer excellent terms to purchasers who begin payment before the building is finished. This can work in your favour but you must be sure that the developer is reliable and solvent, and that he is able to bring the project to completion.

The developer must offer a bank guarantee that assures the return of your total investment if the project stalls or fails. It is important that this guarantee does not cost you anything and details of the guarantee must be documented in the contract or a separate document.

Bank Loans and Mortgages – With the introduction of the euro and the lifting of virtually all exchange control, both residents and non-residents can now obtain loans and mortgages against a Spanish property in any currency from any bank in the world – in theory at least.

With inflation and interest rates at an all-time low in Spain, Spanish bank mortgages are now being offered at low rates compared to the rest of Europe. Mortgages of 20 and 30 years, and mortgages of 100% of the property value, are available in Spain. For a non-resident buyer, the mortgage is usually limited to around 70% of the property valuation.

It’s certainly worth shopping around as terms, penalties and interest rates do vary significantly. Typically, the building societies in Spain offer lower interest rates and lower penalty fees but Spanish banks are waking up to the potential from foreign investors