Investing in a short-term rental property in Costa Blanca can be a lucrative opportunity, but financing your purchase requires careful planning. Whether you are a first-time buyer or an experienced investor, understanding the best financing options, mortgage requirements, and alternative funding sources will help you make a profitable investment.
In this guide, we will explore the best ways to finance a short-stay property in Costa Blanca, including mortgage options, private financing, and tax considerations.
mortgage options for buying a short-stay property in Costa Blanca
If you need financing, obtaining a mortgage is one of the most common ways to buy an investment property in Spain.
can foreigners get a mortgage in Spain?
Yes, foreign buyers can apply for a Spanish mortgage, but the conditions may differ from those for Spanish residents. Banks typically finance up to 70% of the property’s value for non-residents, while residents can receive up to 80% financing.
best banks for property financing in Spain
Some of the most popular Spanish banks offering mortgages to foreign investors include:
- Banco Santander
- CaixaBank
- BBVA
- Banco Sabadell
requirements for obtaining a mortgage in Spain
To apply for a mortgage, you will typically need:
- A valid passport or NIE (número de identificación de extranjero)
- Proof of income (such as salary slips or tax returns)
- Credit history and debt-to-income ratio assessment
- Property valuation report
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alternative financing options
If obtaining a traditional mortgage is not ideal, there are alternative ways to finance a short-term rental property.
private loans from investors
Private lenders or real estate investment groups can offer funding with more flexibility than banks. These are especially useful if you:
- Have difficulty securing a mortgage.
- Need faster approval times.
- Want to finance a portion of the purchase without using a bank loan.
home equity loans
If you already own property in Spain or another country, you may be able to use home equity to finance your short-stay investment. This involves borrowing against the value of your existing property, which can be a cost-effective way to secure financing.
seller financing
Some property sellers in Costa Blanca offer seller financing, where the seller acts as the lender and allows you to pay for the property in installments. This is less common but can be beneficial if you cannot secure a mortgage.
real estate crowdfunding
Real estate crowdfunding platforms allow investors to pool their money together to purchase rental properties. Some well-known platforms include:
tax and legal considerations
When financing a short-term rental property in Costa Blanca, it’s important to be aware of tax obligations and legal requirements.
property taxes in Spain
- Property transfer tax (ITP): 6-10% of the property value (for second-hand homes).
- VAT (IVA) and stamp duty (AJD): 10% VAT plus 1.5% stamp duty (for new homes).
- Annual property tax (IBI): varies by municipality but typically 0.4-1.1% of the cadastral value.
rental income tax for non-residents
If you rent out your property, you must pay rental income tax:
- 24% tax on rental income for non-EU citizens.
- 19% tax for EU citizens, with allowable deductions for expenses.
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how to improve your financing chances
If you are struggling to secure financing, here are some tips to improve your chances:
increase your deposit
A larger deposit reduces the risk for lenders, making it easier to get approved. Most Spanish banks require at least 30% down for non-residents.
improve your credit score
A strong credit history increases your chances of getting better mortgage rates. Make sure to:
- Pay off outstanding debts.
- Maintain a low debt-to-income ratio.
- Have a stable source of income.
work with a mortgage broker
A mortgage broker can help you find the best financing deals, negotiate terms, and simplify the application process.
is a short-stay property in Costa Blanca a good investment?
The Costa Blanca region continues to attract millions of tourists each year, making it an ideal location for short-term rental investments.
best cities for short-stay investments
- Alicante: high year-round demand with steady rental income.
- Benidorm: strong seasonal demand, high rental yields.
- Torrevieja: affordable property prices, growing international community.
- Javea: luxury market with premium rental prices.
Read more about the best cities in Costa Blanca for short-stay investments.
choosing the best financing option for you
Financing a short-stay property in Costa Blanca requires careful planning. Whether you choose a traditional mortgage, private financing, or alternative funding, it’s essential to consider your budget, tax obligations, and investment goals.
If you’re looking for expert property management and higher returns on your investment, contact Blanca Stay for professional rental solutions.