Borrowing in Spain with a low director's salary: what challenges do you face?
Many entrepreneurs with a private limited company (BV) deliberately pay themselves a low salary. While often tax-wise smart, it can work against you as soon as you want to finance a house in Spain. Spanish banks scrutinize your verifiable income closely, and for a director-major shareholder (DGA), this is often listed as low on paper. In this blog, you will read why a low salary reduces your borrowing capacity, which rules apply, and how to work around them as an entrepreneur. If you want to know the general rules first, read our explanation regarding mortgages in Spain.
Table of contents
- Why your low salary weighs more in Spain
- The three factors a Spanish bank looks at
- How your maximum mortgage is determined
- The fallacy: your Dutch borrowing capacity says nothing about Spain
- Please note: your Dutch obligations count.
- This is how you increase your borrowing capacity as a director/major shareholder.
- Minimum income and other thresholds
- Frequently Asked Questions
Why your low salary weighs more in Spain
In the Netherlands, as a director-major shareholder, you can steer your income using a combination of salary, dividends, and profit within the BV. However, a Spanish bank primarily bases its assessment on the structural and demonstrable income you receive, which is usually your salary. Therefore, a low customary salary means a low basis for the assessment.
This is not unwillingness on the part of the bank, but caution: they want to be certain that you can bear the monthly payments for years to come. The lower your documented income, the more conservative the bank is regarding what it considers responsible to lend. For an entrepreneur who pays themselves very little, this is an important point to consider.
The three factors a Spanish bank looks at
Your financing capacity in Spain is basically determined by three things:
- Loan-to-value (LTV): as a non-resident, you typically finance a smaller portion of the property value than a Spanish resident. You contribute the remainder plus the closing costs yourself.
- Housing cost standard: your total monthly loan expenses must not exceed a certain proportion of your net income. In Spain, this is legally enshrined in the affordability test.
- Age and term: the mortgage must be repaid within a certain age, which affects the term and therefore your monthly payments. The amount also depends on the interest rate; read our blog about mortgage interest rates in Spain for more information.
That housing cost standard is usually the determining factor for a director-major shareholder with a low salary: that is the first thing you run into.
How your maximum mortgage is determined
The core is simple: your maximum mortgage is derived from the housing cost standard, applied to your income. The lower your salary, the smaller the amount that fits within that standard, and therefore the lower your maximum loan. On top of that, the LTV limits how much of the home's value the bank finances.
Stating a general figure is not useful, as the outcome depends heavily on the interest rate, the term, and your other obligations. Consequently, two entrepreneurs with the same salary can have very different borrowing capacities. Only a personal calculation provides a reliable picture; use our mortgage calculation tool for this or have your situation assessed.
The fallacy: your Dutch borrowing capacity says nothing about Spain
Many entrepreneurs assume that their maximum Dutch mortgage applies approximately the same in Spain. That is incorrect. Dutch and Spanish banks calculate differently, apply different standards, and weigh entrepreneurial income differently. Therefore, an amount you could borrow in the Netherlands says little about what a Spanish bank considers responsible.
In addition, as a non-resident, you are assessed more strictly than a Spanish resident. Therefore, do not rely on assumptions, but on the Spanish rules. This prevents you from looking at properties outside your actual budget, or from missing opportunities because you overestimate your wealth.
Please note: your Dutch obligations count.
The housing cost standard looks at your total monthly expenses, not just the new Spanish mortgage. If you still have a mortgage, business financing, a lease, or alimony payments in the Netherlands, that will reduce your available capacity.
An entrepreneur with a low salary and ongoing obligations in the Netherlands will therefore quickly find themselves with little left over within the standard. Therefore, map out these expenses thoroughly in advance, as they partly determine what is realistic.
This is how you increase your borrowing capacity as a director/major shareholder.
The good news: a low salary doesn't have to be the end of the road. You can strengthen your position in several ways:
- Include dividends and profit. Some banks structurally include dividends or average profit, provided you can substantiate this with two to three years of annual figures.
- Contribute more of your own money. With lower financing, your monthly costs decrease, making it more likely that you will stay within the housing cost standard.
- Consider a temporarily higher salary. Increasing your usual salary for one or two years can boost your demonstrable income before you apply.
- Choose the right bank. Acceptance policies vary widely: some banks only look at salary, while others consider the overall picture. To do so, also check the differences between banks in Spain.
Which route yields the most depends on your structure and figures. A preliminary analysis quickly clarifies what a bank is likely to accept in your case.
Minimum income and other thresholds
In addition to the calculation, many Spanish banks apply a minimum net income. If your salary falls below this, a bank may reject the application, even if the rest of your profile is strong. Including dividends or a second applicant can then make all the difference.
It is therefore essential to present your income as fully and well-substantiated as possible, rather than just your base salary. The stronger and more consistent your dossier, the more leeway a bank is willing to grant.
Frequently Asked Questions
Does my dividend count towards a Spanish mortgage?
Sometimes. Some banks structurally include dividends or average profit if you can demonstrate this with two to three years of annual figures. Other banks only base their calculations on your salary.
Why is my low salary a problem if my private limited company is profitable?
Because a bank primarily calculates based on your demonstrable, structural income. Profit in the BV does not automatically count. However, with good annual figures and the right bank, a portion of it can be included.
Can I compensate for a low salary with more of my own money?
Often, yes. By contributing more of your own money, your monthly payments decrease, making it more likely that you meet the housing cost standard. It also increases the bank's confidence.
How much exactly can I borrow then?
That varies too much from person to person to make a general statement. It depends on your income, your other expenses, the interest rate, the term, and the bank. Only a personal calculation will provide a reliable figure.
Does my Dutch mortgage count?
Yes. Your total monthly expenses are taken into account, so an existing Dutch mortgage or other financing reduces your capacity for a Spanish mortgage.
