Buying a House in Spain: Mortgage Contingency Clauses and Legal Checks

This is the fourth article of a series decidated to purchasing real estate property in Spain: previously, we presented how to structure the purchase of a real estate property and what steps you must undertake to ensure the purchase is efficient and safe (you can find it here), the financial and tax information as well as practical tips related to the purchase process (here) and how to handle international inheritance tax implications (here).

How to obtain a mortgage loan when Purchasing Property in Spain

When a buyer in Spain wishes to purchase property using a mortgage loan, the financing process typically begins after selecting a specific property and signing a private purchase agreement, which is usually accompanied by a deposit payment. The entire financing process is strictly regulated under Spanish civil and banking law, offering a high degree of legal security, including foreign and non-resident buyers.

Once the private purchase contract is signed, the bank initiates an official property valuation. This is a mandatory step for determining the maximum loan amount, the financing conditions and for loan approval.

Only after the valuation is completed will the bank issue a formal mortgage offer. The entire process, from the initial application to the final offer, can take several weeks, depending on the complexity of the buyer’s financial profile and the documentation required. The final step occurs before a Spanish notary, where two deeds are signed simultaneously:

• The public deed of sale, and
• The mortgage deed.

At this stage, the bank transfers the loan amount directly to the seller, ensuring legal and financial certainty for all parties involved.

While this structure guarantees legal clarity, it also means that mortgage financing is not secured at the time the private agreement is signed. Therefore, it is strongly recommended to include a mortgage contingency clause in the private purchase contract. This clause makes the completion of the sale conditional upon obtaining financing, thereby protecting the buyer’s deposit in the event of a mortgage denial.

Key Differences for Foreign Buyers

Spanish banks do not generally issue binding pre-approvals before a specific property has been chosen. Foreign buyers, particularly non-residents, should also be aware of additional requirements, including:

• Submission of translated or apostilled foreign documents,
• More extensive due diligence and KYC (Know Your Customer) procedures, and
• Generally longer processing times.

These factors may extend the mortgage timeline and should be accounted for in the overall transaction planning.

Differences between buying a second-hand apartment/house and buying a new apartment/house directly from the developer

The main difference is that, in the case of a new home, VAT and AJD (stamp duty) are paid, and in the case of a second-hand home, only ITP (property transfer tax) is paid, as already explained in section III, paragraph 3.

In addition, in the case of new homes, a series of legal guarantees are established—for 1, 3, and 10 years—for possible construction defects that may arise in the home, for which the developer is liable. On the other hand, in the case of second-hand homes, the seller is liable for hidden defects only for a period of 6 months from delivery.

If the property is purchased from a natural person, it will generally be a second-hand home, whereas if it is purchased from a legal entity, it will normally be a new build and will be purchased from a developer.

Therefore, the fundamental differences will be those already mentioned above: different taxation and greater legal guarantees in the case of purchase from legal entities. Additionally, in the case of purchasing the property from a legal entity developer, there are enhanced documentation and reporting obligations, which do not apply in the case of sale by individuals.

Are there debts associated with the property that the buyer will be liable for?

The buyer is liable for any debts owed to the Homeowners’ Association for the three years prior to the purchase and for the outstanding portion of the current year’s dues. The buyer is also vicariously liable for any outstanding property tax (IBI) or other local taxes owed by the previous owner.

To adequately protect their interests, the buyer should, on the one hand, request a certificate of debts from the Homeowners’ Association and, on the other hand, check the status of payments of property tax and other municipal taxes.

What are the specific provions of Spanish Coastal Law (Ley De Costas)?

Properties located near the sea may fall under the Spanish Coastal Law (Ley de Costas), which regulates land use in the public maritime-terrestrial zone and its surrounding protected areas. These coastal strips are public domain, and strict limitations apply to ownership, construction, and renovation.

Even for older, long-standing buildings, it is vital to verify whether the property lies within a protection zone. Depending on the classification of the area, consequences can range from restricted use or denial of renovation permits to expiration of rights of use or, in extreme cases, administrative demolition orders.

Legal due diligence is essential to determine the status of the plot and identify any concessions or time-limited occupancy rights granted by the authorities.

What rules apply to Country Houses (Fincas Rústicas)?

Country houses (fincas rústicas) deserve special attention due to their location in rural and often protected areas, which are subject to strict urban planning and environmental regulations.

Depending on local and regional classifications, the land may be designated exclusively for agriculture, forestry, or conservation, limiting the potential for construction, expansion, or change of use.

Additionally, many rural properties have existing buildings that may never have been fully or properly legalised. As with coastal properties, buyers should review all applicable planning and environmental restrictions carefully before purchasing. 

How are squatting cases  (Okupas) regulated under Spanish law?

In recent years, Spain has experienced a rise in squatting cases, influenced by housing shortages, unaffordable rents, and high costs in urban or tourist areas. While the issue is complex and socio-politically sensitive, this section focuses on practical implications for property owners.

Importantly, unlawful occupation (okupación) is relatively uncommon in most parts of Spain. The majority of property owners, especially those who secure and monitor their homes properly, are unlikely to be affected.

Effective deterrents include:

• Alarm systems and surveillance cameras,
• Remote monitoring,
• Local property management services (especially for second homes).

Spanish law differentiates between:

• Intrusion into a primary residence (treated as unlawful entry),
• Occupation of vacant or second homes (classified as usurpation, requiring court action).

Recent Legal Reforms – “Anti-Squatting Law” (Ley Orgánica 1/2025): To address lengthy eviction timelines, Spain introduced reforms, which include:

• Within the first 48 hours of occupation:
  Police may evict squatters without a court order if no legal proof of residence is presented. Owners must provide immediate proof of ownership.
• After 48 hours: Eviction must follow a formal judicial process.
• Fast-track legal procedures: Eviction claims may now be processed in about 15 working days under accelerated procedures—though real-world implementation may vary by jurisdiction.

While these special topics may not apply to every transaction, they highlight the importance of thorough due diligence and professional legal advice when buying property in Spain. Understanding the implications of coastal laws, rural zoning, inheritance regulations, and property security helps international buyers make informed, secure, and future-proof investments.