Investment approach
Hipoteca in Spain: what the right is and how it is registered
A mortgage in Spain arises not at the notary but in the registry, and goes with the flat to any owner. How the document travels, what deadlines the registrar has and what a buyer should check.
A hipoteca (mortgage) in Spanish law is a creditor's real right over a property securing a debt, and it arises only once it is entered in the Registro de la Propiedad (the Spanish land registry). Two things are needed for validity: the escritura (notarial deed) before a notary and its registration (art. 145 of the Ley Hipotecaria, the Mortgage Law; art. 1875 of the Código Civil). The registrar enters the document within 15 days of its submission (art. 18 of the Ley Hipotecaria).
The main property of a mortgage for a buyer: it follows the flat. The law says the mortgage subjects the property to performance of the obligation, whoever its holder is (art. 104 of the Ley Hipotecaria). A seller's mortgage that is unpaid and not cancelled stays on the flat after it is sold.
How a mortgage differs from a loan
A loan is the borrower's debt to the bank. A mortgage is the bank's right over a specific flat if the debt is not paid. They are often called by one word, but for a deal the difference is fundamental.
| What | Loan (préstamo) | Mortgage (hipoteca) |
|---|---|---|
| Nature | The borrower's obligation | A real right over property |
| Where it is recorded | Contract, escritura | Entry in the Registro de la Propiedad |
| Who it stays with on a sale | With the borrower | With the flat, until the entry is cancelled |
| How it ends | By repaying the debt | By a cancellation entry (cancelación) in the registry |
| Where it shows | In the bank's documents | In the cargas (encumbrances) section of the nota simple (land-registry extract) |
Hence sellers' main mistake: the debt is paid, but the registry entry stays. To remove it, an escritura or another authentic document with the bank's consent to cancellation is needed (art. 82 of the Ley Hipotecaria). How a seller goes through this is described in the article on cancelling a mortgage before a sale.
How the document travels from the notary to the registry
The path has three steps, and each has its own legal effect.
- Escritura before a notary. Before signing a mortgage on a home, the borrower receives the FEIN (the standardised European information sheet) and the draft contract at least 10 days ahead and goes through the notary's explanation free of charge; otherwise the notary will not sign the mortgage escritura (art. 14 and 15 of Ley 5/2019 reguladora de los contratos de crédito inmobiliario, the Real Estate Credit Contracts Act).
- Asiento de presentación (entry of presentation). The document is submitted to the registry where the flat is, and the entry of presentation fixes the queue position. While only this entry is in force, no other incompatible document can be entered on the same flat for 60 days (art. 17 of the Ley Hipotecaria).
- Inscripción (registration). The registrar checks the document and enters it within up to 15 days of the submission date. If the registrar is late, the registrar's fee is cut by 30% (art. 18).
By law the costs of registering the mortgage guarantee are borne by the bank, not the borrower (art. 14.1.e of Ley 5/2019). How registry timelines generally look after a deal is covered in the article on registration times.
What the buyer will see in the nota simple: a worked example
Worked example, not a forecast. The flat is sold for 400,000 €. The seller has a mortgage balance of 150,000 €. The buyer takes a loan of 280,000 €. On the day of the deal, three documents are signed at the notary: cancellation of the seller's mortgage, the sale and the buyer's new mortgage.
| Moment | Owner in the nota simple | Mortgages in the cargas section |
|---|---|---|
| Before the deal | Seller | The seller's bank mortgage |
| Day of the deal, documents submitted | Seller, with entries of presentation | The old mortgage is still visible; cancellation, sale and new mortgage submitted |
| After registration, within 15 days | Buyer | The buyer's bank mortgage for 280,000 € |
Of the 400,000 € price, the seller's bank receives 150,000 € directly on the day of the deal and the seller 250,000 €. That is exactly why the cancellation of the old mortgage is arranged at the same time as the sale: the money goes to the bank, and the cancellation document is submitted to the registry together with the sale. If a seller promises to "cancel the mortgage later", that is a question for the abogado (lawyer) before the arras (reservation deposit contract).
What the buyer should check before the arras
- A fresh nota simple. The cargas section shows whether there is a mortgage, for what amount and in favour of which bank. The document is informational, the final check is done by a lawyer; the types of encumbrance are covered in the article on cargas.
- A cancellation plan. If a mortgage is shown, ask the seller how much is left and whether the day of cancellation has been agreed with the bank.
- A condition in the arras. What happens if by the notary date the seller is not ready to cancel the mortgage: postponement, return of the arras, a penalty.
- Your own mortgage. If the purchase is on a loan, the bank's timelines are built into the notary date in advance.
When the standard scheme does not work
The "cancellation on the day of the deal" scheme does not work if the seller's debt is larger than the price: then the seller's bank must agree to the sale, and the deal turns into a negotiation with it. A separate regime applies to a purchase where the seller's mortgage is transferred to the buyer (subrogación, substitution of the lender): the bank must approve the new borrower. And another to a flat whose mortgage is already in enforcement: there the chain of documents and the timelines are different, and such a purchase is not started without an abogado. If an independent assessment of such a deal is needed, DNPI Capital does it as part of an investment analysis.
Questions and answers
From what moment is a mortgage in Spain considered established?
From the entry in the Registro de la Propiedad. An escritura signed before a notary is not enough: art. 145 of the Ley Hipotecaria and art. 1875 of the Código Civil say so expressly.
Does the seller's mortgage pass to the buyer of the flat?
The mortgage stays on the flat until its entry is cancelled in the registry, whoever the owner is. That is why the cancellation is arranged on the day of the deal and submitted to the registry together with the sale.
How long does registration of a mortgage take?
The registrar enters the document within 15 days of the submission date, if there are no defects. If the registrar is late, the fee is cut by 30%.
Who pays for registering the mortgage?
The bank: under art. 14 of Ley 5/2019, the creditor bears the costs of entering the mortgage guarantee in the registry. The borrower pays for the tasación (valuation).
Where can you see whether a flat has a mortgage?
In the nota simple from the Registro de la Propiedad, in the cargas section. It is requested online before the arras are signed.
