Is a Spanish mortgage a good idea?

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There are nearly always good reasons for financing at least a part of a property purchase with a mortgage. However at a time like this, with Euro-zone interest rates so low, it makes particular sense to consider using a Spanish mortgage to take advantage of the extraordinarily cheap cost of borrowing. With inflation around 3% - 3.5% in Spain, and base rates at around 2% the real cost of borrowing money in Spain has recently been zero or negative. Therefore even if you have the cash to purchase your Spanish property outright there is a good argument to be made for using the bank's cheap money to finance at least a part of your purchase, and to put your own money to work earning a good return elsewhere.

In this golden scenario you borrow from the bank at next to nothing in real terms, and if the value of property in Spain rises, as it has done almost every year in the past, you profit from all the capital gains. In the meantime you have your own funds invested in other assets also earning you a return. Having said that you should always borrow on the assumption that interest rates will go up at some point, and be sure that if they do you will be able to cope with the financial consequences. To put it another way don't borrow more than you can cope with if interest rates rise - and they are sure to- especially if you are relying on rental income to cover your financing costs (your rental assumptions are another source of uncertainty that you need to evaluate carefully).

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© Mark Stucklin of Spanish Property Insight – Everything you need to know about Spanish property

More information about mortgages in Spain:

Start arranging your Spanish mortgage early on

Overview of the Spanish mortgage market

Spanish mortgage costs explained

Is a Spanish mortgage a good idea?

Spanish mortgages vs UK Mortgages