If you are one of those people who reached retirement “on your own,” having enough savings to acquire a property on the beach or the mountain, you will hardly find an impediment to buy it. What is convenient to clarify is what you need to get a mortgage.
The good news to start the procedure is that banks consider these loans, but with some conditions.
Loan: In case your savings are not enough and your income is not high for buying a house, the situation is complicated. The loan can then become a major impediment to the purchase of the property, even considering that the standard financing of a bank accounts for 80% of the price of the property, banking institutions do not usually exceed 50% in the case of these loans for retirees. That way, they ensure their payment and offer greater ease to fulfill this commitment.
So, if you are retired and want to apply for a home loan, we recommend having good savings or a significant and regular income from your pensions, for example, to meet the payment.
Income: Having a public pension plan is a guarantee of payment for the bank, so the risk of default is lower. If you get a private pension this will mean a greater push to make the monthly payment more comfortable.
Age: Banks in these situations usually require that none of the loan holders exceed 70-75 years at the end of the payment, and some entities even consider the ceiling at 80 years. So, these mortgages do not exceed 10 or 15 years.
Being a shorter mortgage, interest is lower compared to a mortgage to be paid in 30 years. In this case, the buyer will save the life insurance (which covers an age limit of 65 years) and the insurance of amortization (that only covers the person until the age of 70).
Considerations for the purchase of homes when you are retired
If you have made the decision of buying a house despite your age, remember that if you already own a private home:
- You can sell it if you do not use it, increasing the saving percentage for the purchase of a second property (remember the exception of those over 65 years to pay the IRPF -Income Tax Return for Individuals- for the capital gains arising from this sale).
- Consider renting the same, and using the rent to complete the payment of the mortgage of your home for retirement.
Pre-retired individuals: They have more possibilities to obtain a mortgage, because they usually have a medium or medium-high socioeconomic profile, are between 55 and 65 years of age and “collect higher pension segments.”
We invite you to read this article related with buying a house in Spain: Who pays the IBI when buying a house in Spain?
If you live in La Axarquía, in municipalities such as Alcaucin, Frigiliana, Vélez-Málaga or Torre del Mar, you can contact us for accounting or solicitor services related with buying a house when you are already retiring.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.
Author: Rosana Tejada
Biographical Info: Rosana Tejada Crespo is a tax advisor holding a Master’s Degree in International Taxation. She specialises in companies and freelancers, tax regulations concerning foreign employees (Beckham Law), non-resident tax, inheritance tax and Spanish income tax. She is one of the founders of Legal & Tax Help (2000), which comprises a group of English speaking solicitors, economists and architects.