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The increased level of mortgage arrears in Spain has resulted in banks here making access to mortgages more difficult. While formerly copies of the last three payslips as well as the annual tax return were considered sufficient evidence of means to repay a mortgage, the banks are now demanding the payslips from months prior to three months as well as more than one years’ tax return. In some cases banks are requesting that mortgage applicants include the length of time spent with their current company. In the case of self-employed, a copy of Form 036/037 used to register as self-employed will be required along with tax returns for the previous three quarters.
The more stringent rules are noticeable not just in terms of the documentation required but also in the increased recourse to credit checks, not just for evidence of any prior failure to repay a loan, but also to utilities companies to check if there is evidence of any unpaid bills there. Banks are also checking the type of employment contract (permanent or temporary).
As a general rule the financial institutions are refusing to offer credit that requires more than 30% of net income to pay the monthly mortgage instalments.
Mortgage applications that represent less than 50% of the value of the property or €100,000 will be viewed less stringently than those of a higher value.
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