How to finance your property purchase
The alternatives for most people are to finance the purchase either through a framework loan in Norway, a Spanish bank or DNB in Luxembourg.
Loans in Norway
Norwegian banks cannot take a mortgage on Spanish property. This means that only those who have free capital in their Norwegian property can borrow from a Norwegian bank to buy a holiday home abroad. In other words, you borrow with security in the Norwegian home. You can increase your existing home loan or take out a new loan secured by a debt-free Norwegian property. It can be a good solution for many, but it also means that you lock up "available capital" in your Norwegian property.
Loan in Spanish bank/Dnb Luxembourg
If you borrow with the property in Spain as collateral, you still have capital and financial flexibility at home. Should you need money in the future, the free value is still there. Many help e.g. their children into the housing market by mortgaging existing housing in Norway.
The first thing that determines how much you can borrow is whether or not you are a "resident" in Spain. That is, if you are considered resident in the country with income that is taxed in Spain. Resident Norwegians in Spain can borrow from a Spanish bank on the same terms as Spaniards, which means up to 80% of the home's value.
If you are considered resident in Norway, a Spanish bank will be able to lend you 50 - 70%. Repayment times vary from bank to bank. It can take up to 30 years to repay the bank loan. Most banks want the borrower to have repaid the entire loan before they are 70-75 years old.
Do you want more information about loans in Spain? We work closely with BankinSpain, a certified loan broker in Spain who helps you find the bank that offers the best conditions.
Read more about BankinSpain here.
Interest on bank loans in Spain
The interest rate for the vast majority of bank loans in Spain is based on Euribor. This is the base interest rate from the European Central Bank, which in March 2021 was -0.501%, i.e. a negative interest rate. Loan customers normally agree an interest rate equivalent to Euribor + 1-2% with the bank, slightly higher for fixed interest rates. The special situation with a negative central interest rate is the central bank's incentive to stimulate the economy in the Eurozone. This means that fixed interest rates, which have long been relatively unknown in Spain, have now become far more common.