Interest-only mortgage in Spain: is that possible and what are your alternatives?

You want to keep your monthly payments in Spain as low as possible and are considering an interest-only mortgage, like the ones you are used to in the Netherlands. In that case, you will probably be turned down by a Spanish bank. Interest-only financing works very differently in Spain than here, and for the average buyer, it simply does not exist.

Toch is dat niet het hele verhaal. Je leest hieronder waarom Spaanse banken vasthouden aan aflossen, wat je in de praktijk wél krijgt, en met welke alternatieven je je maandlasten alsnog kunt drukken. Zo weet je precies waar je aan toe bent voordat je een woning in Spanje financiert.

Table of contents

1. Is an interest-only mortgage possible in Spain?
2. Why Spanish banks do not offer interest-only mortgages
3. What you do get: the annuity mortgage
4. The exception: private banking for wealthy buyers
5. Alternatives for lower monthly costs
6. Interest-only and the entrepreneur or director-major shareholder
7. The risks of interest-only financing
8. This is how you determine your best route
9. Frequently Asked Questions

Is an interest-only mortgage possible in Spain?

The short answer: at a Spanish bank, almost never, certainly not as a non-resident. Spanish banks offer almost exclusively the annuity mortgage, the hipoteca, where you pay both interest and principal every month. A fully interest-only structure, where you only pay interest and repay the principal at the end of the term, is not part of their offerings for foreign buyers.

You notice this immediately as soon as you request a quote. Whereas in the Netherlands you could opt for an interest-only portion, in Spain an annuity mortgage is the standard. Repayment only (in Spanish, amortización) is the norm at regular banks. The only limited room lies in private banking, and we will return to that later. You can read more about the basic rules on our page about mortgages in Spain.

Why Spanish banks do not offer interest-only mortgages

This is not a coincidence or unwillingness on the part of one bank, but a pattern present throughout the Spanish market. A few factors are at play.



First, the aftermath of the real estate crisis. Between 2008 and 2013, Spanish banks were badly burned by unpaid loans and homes that ended up deeply underwater. Since then, repayment has been central to their risk model. A loan that decreases monthly is simply safer for the bank than a loan that remains at the same level until the end.

Secondly, stricter regulations. Since the introduction of the Spanish mortgage law Ley 5/2019, consumer protection regarding mortgages has been tightened, and banks assess your situation more closely. Thirdly, your profile as a foreign buyer. A non-resident does not live in Spain and earns their income elsewhere, which a Spanish bank views as a higher risk. Precisely in such cases, the bank wants the debt to decrease steadily. An interest-only arrangement does not fit into that picture.

What you do get: the annuity mortgage

The mortgage you *can* get as a Dutch or Belgian national in Spain is the annuity mortgage. It is simpler than it sounds. The key features at a glance:

• Financing up to a maximum of 70% of the purchase or appraisal value for non-residents. You therefore contribute at least around 30% yourself, plus buyer's costs.
• Buyer's costs of roughly 10 to 14% on top of the purchase price, for tax, notary, registration, and lawyer.
• An interest rate that can be fixed, variable, or mixed. Many Spanish mortgages are linked to the 12-month Euribor, on top of which the bank charges a premium depending on the risk.
• A term linked to your age. There is no statutory maximum age, but at most banks, the mortgage must be paid off before you turn 75.

That age limit has a concrete impact on your loan term. If you are 50 or younger, you can usually get a term of up to 25 years. If you are 65, for example, that leaves about ten years. Exactly how much of your own money you need depends on your situation. We go into this in more detail on the page about equity for a Spanish mortgage. If you want to quickly find out what is possible in your case, use the mortgage check.

The exception: private banking for wealthy buyers

There is one area where there is slightly more flexibility than the standard product: private banking. For wealthy clients, some banks are willing to provide tailor-made financing, for example regarding the terms or the financing rate. This almost always happens in exchange for something: you place a portion of your assets under the management of the bank.

It is important to be honest: even through private banking, a fully interest-only mortgage like the one you knew in the Netherlands is not a standard product. It involves a tailored approach; the thresholds vary significantly by bank and by situation, and a discussion about your assets and plans is always necessary. What is feasible for you depends on your assets, your income, and the bank we work with. You can read more about this on our page about private banking for a mortgage in Spain.

Alternatives for lower monthly costs

If your main goal is to keep your monthly payments low, an interest-only mortgage is not your only option. There are a few routes that often work better in practice.

• Equity in your Dutch home. If you withdraw part of the equity from your Dutch bank, you can use that capacity to finance your Spanish purchase. With a Dutch lender, an interest-only portion is sometimes possible, within Dutch regulations. Read how this works with a Spanish mortgage through a Dutch bank.
• Buying a new-build. With a new-build home, you pay in installments during construction, and the mortgage often only starts upon completion. This keeps your expenses lower until you receive the keys. See what is involved with a Spanish new-build home.
• A longer term or more personal contribution. If you choose a longer annuity or contribute more of your own money, your monthly payments will decrease immediately. Run through the scenarios with the mortgage check.

Which route suits best varies from person to person. One buyer wants to tie up as little of their own money as possible, while another prefers the lowest possible monthly payments. By comparing the options before making an offer, you avoid surprises at the bank.

Interest-only and the entrepreneur or director-major shareholder

If you are an entrepreneur or a director-major shareholder, the situation is slightly different. Your assets are often held in your holding company rather than as savings in a private account. In that case, the private banking route is usually the only place to discuss a more flexible structure, because you can leverage those assets in your discussions with the bank.

At the same time, Spanish banks scrutinize the stability of an entrepreneur's income more closely. If you pay yourself a low salary, this reduces your borrowing capacity, even if there is sufficient capital in the business. You can read how best to deal with this under DGA and Spanish mortgages and under borrowing with a low DGA salary.

The risks of interest-only financing

Even if an interest-only mortgage were possible, it is not automatically the smartest choice. After all, you do not pay off any principal, so at the end of the term, your entire debt remains. You would then have to refinance it or sell the property to pay it off, and whether that is possible depends on the value and the interest rate at that time.

On top of that, many Spanish mortgages move in tandem with the Euribor. If you opt for a variable rate and the Euribor rises, your monthly payments increase, whereas your debt remains the same if you do not make repayments. So, don't count your chickens before they hatch based on low monthly payments alone. An annuity might feel heavier at first, but you do build equity every month and end up with no residual debt.

This is how you determine your best route

Start with your goal. Do you simply want to keep your monthly payments low, or do you want to utilize your assets as efficiently as possible? That makes a big difference to the solution. Next, run through a few scenarios: an annuity with a longer term, a larger personal contribution, or financing via your Dutch equity.

If substantial assets are involved, it is worthwhile to have the private banking route assessed. In all cases, the same applies: align your calculations and application with what Spanish banks actually accept, so that you do not get stuck halfway through. We would be happy to help you determine which route yields the best results in your situation.

Frequently Asked Questions

Can you borrow interest-only in Spain?

No, as a non-resident, you cannot borrow interest-only at a regular Spanish bank. Spanish banks offer almost exclusively annuity mortgages, where you pay monthly interest and principal. Only through private banking is there sometimes more room for customization, but even then, a fully interest-only mortgage is not the standard.

Why do Spanish banks not offer interest-only mortgages?

Since the real estate crisis of 2008 to 2013 and the introduction of the mortgage law Ley 5/2019, Spanish banks have become more cautious. Repayment is central to their risk policy, and with a foreign buyer, they are particularly keen to see the debt steadily decrease.

Can a Dutch bank grant an interest-only mortgage for Spain?

That can be an indirect route. If you withdraw equity from your Dutch home, an interest-only portion with a Dutch lender is sometimes possible, subject to Dutch regulations. You then use that withdrawal to finance your Spanish property.

How much of my own money do I need for a Spanish mortgage?

Count on a minimum down payment of around 30% of the value, plus buyer's costs of roughly 10 to 14%. For non-residents, a Spanish bank finances up to a maximum of 70% of the purchase or appraisal value.

Up to what age can I take out a mortgage in Spain?

There is no statutory maximum age; each bank determines its own limit. In practice, at most banks, the mortgage must be paid off before the age of 75. Your age therefore partly determines the maximum term: if you are 50 or younger, this can extend to 25 years.

Is an interest-only mortgage via private banking a good idea?

That depends on your assets and your goal. It is always a tailored approach, the terms are often less favorable, and you do not make any repayments, so the full debt remains at the end. With good advice and sufficient assets, a flexible setup can be suitable, but make sure you are well informed.