Due to the current economic climate in Spain, with unusually low interest rates and lower house prices, monthly mortgage payments are being found to be more affordable than the cost of renting a home, according to the latest study carried out by the financial comparison website, HelpMyCash.com, who have also developed a free calculator to help users decide which option is most appropriate for them, based on their own personal situation.
The price per square metre of housing in Spain during the first quarter of the year, according to the Ministry of Public Works’ data, was 1,492.40 euros. Based on this figure, a house of 100 m2 would have an average value on the market of 149,240 euros.
Based on funding of 80% and a term of 30 years, buying this type of house with a mortgage (where the average interest rate on new mortgages in April – fixed-rate and variable – was 2.09%), would necessitate a payment of 446.69 euros per month while, according to an internet comparison, the average price per square metre for rental housing in Spain is 7.13 euros. This would mean that the monthly rental cost for a 100 m2 home would be 713 euros.
In Spain’s two largest cities, housing prices per square metre are among the five highest in the country. However, rental prices are also among the highest.
In Madrid, the rental cost of a 100 m2 apartment is around 1,128 euros, while the selling price for a property of this size would be 253,360 euros, which would result in a monthly mortgage payment, based on the above criteria, of 758.33 euros.
In Barcelona, the difference between the rental price and the purchase price is greater. A 100 m2 house has an average monthly rent of 1,299 euros, while the purchase price would be 259,450 euros, bringing the monthly mortgage payment to 776.56 euros.
However, ABC News reported that even though the monthly payments on a mortgage are much cheaper than rental costs, unlike in the years prior to the economic crisis, access to financing is much more difficult because the banks have increased the necessary requirements a potential home buyer must comply with in order to obtain mortgage financing.
Currently, to apply for a mortgage, a potential buyer must have savings sufficient to contribute 35% of the value of the home purchase, as the majority of the banks will only finance up to 80% of the property value, and so the remaining 20% plus expenses must be paid up front by the buyer. The bank also requires mortgage applicants to have permanent, long term employment, and with a monthly income of at least 2,000 euros between all mortgage title holders. In addition they must have no outstanding debts in order to be eligible to receive funding.