Differences in the Credit Process in Poland and Spain

Buying property abroad, especially in Spain, involves not only a different market but also differences in credit procedures. For Poles who are accustomed to certain standards related to obtaining a mortgage, the process in Spain may seem somewhat different. In this article, we will discuss the key differences in the credit process between Poland and Spain to facilitate your preparation for this significant investment.

1. Mortgage Credit Requirements

In Poland:

Polish banks typically grant mortgage loans up to 80-90% of the property's value. Buyers must have a down payment, which, depending on the bank, ranges from 10% to 20% of the property's value. Additionally, the Polish credit system heavily relies on creditworthiness, meaning that banks analyze the client's credit history, income, and employment stability.

In Spain:

In Spain, especially for foreigners, banks are more cautious in granting mortgage loans. Typically, banks provide loans for 60-70% of the property's value. Therefore, buyers must have a larger down payment than in Poland—usually around 30-40%. Spanish banks, like Polish ones, assess creditworthiness but may also conduct a detailed analysis of the buyer's assets.

2. Credit Application Process

In Poland:

In Poland, the process of applying for a mortgage is usually quick and well-organized. After submitting the loan application and providing the necessary documents, such as income statements, employment contracts, or bank statements, the credit decision can be made within a few weeks. In Poland, it is also possible to apply online, which speeds up the entire process.

In Spain:

The credit process in Spain can take longer, especially for foreigners. Banks require more documents, such as bank statements, income certificates, and additional information about assets, e.g., owned properties. An important element of the process is also obtaining a NIE number (Número de Identificación de Extranjero), which is necessary to carry out any financial transaction in Spain. The credit decision can take from several weeks to several months, depending on the bank and the type of property.

3. Costs Associated with the Loan

In Poland:

In Poland, costs associated with a mortgage include bank fees, notary fees, and property insurance. The interest rates may vary depending on the bank, and loans are offered with both fixed and variable interest rates.

In Spain:

In Spain, in addition to bank fees and notary fees, there is an additional cost related to the tax on legal acts (AJD), which ranges from 0.5% to 1.5% of the property's value. Mortgage loans in Spain can have fixed or variable interest rates, but due to differences in tax regulations, initial costs may be somewhat higher than in Poland. Additionally, in Spain, banks often require the purchase of additional insurances, such as life insurance or property insurance related to the loan.

4. Loan Repayment Terms

In Poland:

In Poland, a mortgage can be granted for a period of 20 to 35 years, depending on the client's preferences and creditworthiness. Both fixed and variable interest rate loans are popular in Poland, and clients have the option of early repayment, usually without additional fees after the first few years of repayment.

In Spain:

Spanish mortgages are granted for similar periods, ranging from 20 to 30 years. However, it is worth noting that banks in Spain may be less flexible regarding early loan repayment, and in some cases, they may charge fees for such repayment. The interest rates on mortgages in Spain can be variable, meaning that installments may increase or decrease depending on market conditions.

5. Availability for Foreigners

In Poland:

Foreigners can apply for a mortgage in Poland, but the conditions may vary depending on the country of origin and residency status. Polish banks usually require additional documents from foreigners, and the process may be more complicated if the buyer does not have a stable income in Poland.

In Spain:

Spanish banks are accustomed to servicing foreigners, making the process of obtaining a loan for those outside Spain more common. Banks often have special offers for foreigners and provide support in English. However, as mentioned earlier, the down payment for non-residents is usually higher, which is worth considering.

6. Taxation Related to the Loan

In Poland:

In Poland, there are no direct taxes related to mortgage loans, but interest on the loan is not deductible from income tax, which limits tax relief options for borrowers.

In Spain:

In Spain, there are certain tax relief options, especially if the property is used as the primary residence. Borrowers may benefit from certain tax deductions, depending on their tax situation and residency status.

Summary

Although the credit process in Poland and Spain has many similarities, there are significant differences that may affect how foreigners and residents of these countries approach financing property purchases. The Spanish credit market is more restrictive for foreigners, requiring a larger down payment and a longer application process, while the Polish system is more automated and understandable for local residents. Before making a decision to purchase property in Spain, it is advisable to thoroughly understand these differences and consult with a financial advisor to choose the best loan option.

‍