The arras contract when buying with a mortgage in Spain
Before any Spanish bank signs off on your loan, you are usually asked to sign a private reservation contract, the arras, and pay a deposit. Here is how to protect that money in Spain while your mortgage is still being studied.
Who is behind this page. Colibrí Finances is the mortgage brand of PISOK NUEVO HOGAR, S.L., a credit intermediary registered with the Bank of Spain (code E480). We compare more than 20 Spanish banks for people who live abroad. The study is free; our fees are agreed in writing beforehand, and we support you all the way to signing. We answer in English.
Signing the reservation before the mortgage is approved
In Spain, as anywhere in Spain, the first document a non-resident buyer usually signs is not the mortgage deed but a private reservation contract, known as the arras. It commits both sides to the sale, fixes the price and sets a date for completion at the notary, and it normally requires a deposit to be paid on signing.
For a buyer who still needs a Spanish mortgage to complete, the question is simple but important: what happens to that deposit if the bank's answer, once the file is studied, is not the one you hoped for? The answer depends almost entirely on how the arras contract is worded before you sign it.
Never sign an arras contract in Spain without a suspensive clause linked to mortgage approval written into the text, ideally after our free study of your file.
What the arras (reservation) contract actually does
The arras is a private contract between buyer and seller, agreed before the notary and before the bank hands over any funds. It usually names the agreed price, the completion date, and the deposit paid as a down payment on account of that price. Spanish law recognises more than one kind of arras: penitenciales, which allow either party to withdraw under agreed penalties, and confirmatorias, which bind both sides more tightly and leave less room to walk away. The wording matters as much as the amount.
For a buyer who is financing the purchase with a Spanish mortgage, the arras should never be treated as a formality. Once it is signed, the deposit is at stake, and the seller will expect you to complete within the agreed weeks, whether or not your mortgage has been approved by then.
Why the arras should be made conditional on mortgage approval
The safest structure for a non-resident buyer is an arras contract that includes a suspensive condition: the sale, and the loss of the deposit, apply only if the buyer fails to complete for reasons other than a lender's decision on the loan. In practice this means the contract states plainly that completion is subject to the buyer obtaining mortgage approval within a stated period, and that if no Spanish bank approves the loan on reasonable terms within that period, the buyer can withdraw and recover the deposit.
Without that clause, a buyer who signs the arras before any bank has reviewed the file is taking on the seller's risk as well as their own. If the loan does not come through in time, the seller can usually keep the deposit under a standard penitential arras, even though the buyer did nothing wrong beyond trusting that financing would arrive. This is why we recommend starting the mortgage study in Spain before, or at the very latest alongside, the negotiation of the arras text.
Ask your estate agent and the seller's lawyer to accept a mortgage-conditional arras before you transfer any money; it is a normal, reasonable request in Spain and across Spain.
NIE
Needed before you sign
A non-resident buyer needs a Spanish tax number (NIE) and a Spanish bank account open before the arras is signed, since the deposit is usually paid from that account.
90/180
Your stay while the file moves
As a UK citizen you can be in Spain for up to 90 days in any 180-day period without a visa, which is normally enough to view property, sign the arras and attend the notary for completion.
| Stage | Typical weeks | What is at stake |
|---|---|---|
| Mortgage study and preliminary view from the bank | 2-4 | No money committed yet |
| Arras signed with mortgage condition | 4-8 | Deposit refundable if the loan is not approved in time |
| Formal mortgage offer and notary completion | 2-4 | Deposit applied to the price |
What happens after completion
Once the mortgage is approved and the arras deposit is applied to the price at the notary, the obligations do not end. As a non-resident owner you will file an annual Modelo 210 tax return in Spain, and because Spain and the United Kingdom have a double taxation agreement, a tax adviser can confirm how any Spanish rental income or future gain should also be reported to HMRC. If you ever sell, the buyer will withhold 3% of the price against your Spanish tax bill.
Because you are paying in euros from a sterling income, it is also worth tracking the exchange rate between signing the arras and completing at the notary; a shift in GBP/EUR between those dates can change what the deposit and the final payment actually cost you.
- Recent P60 and payslips, or your last filed Self Assessment tax return
- Bank statements from the last three to six months
- Evidence of any existing loans or mortgage commitments in the United Kingdom
- A valid passport or UK national identity document
- Your Spanish NIE and the details of your Spanish bank account
If you live in the United Kingdom
Spain is a relatively short flight away from most UK airports, making regular visits to a Spanish property straightforward for owners based in Britain. Many British buyers are drawn to Spain for its climate, coastal lifestyle and established expatriate communities. One practical point to bear in mind is that Spanish inheritance law differs from UK rules, so it is worth taking specific advice on how it may affect the property and one's estate. Currency movements between sterling and the euro can also affect the overall cost of purchase and ongoing expenses.
What a Spanish bank will usually ask you for
- Proof of income: recent P60 and payslips
- Last filed UK tax return (Self Assessment)
- Bank statements from the last three to six months
- Evidence of existing loans or mortgage commitments
- Valid passport or UK national identity document
Tax at home and in Spain
Spain and the United Kingdom have a double taxation agreement in place, and a local tax adviser should confirm how rental income or gains from Spanish property must be declared and reported to HMRC.
Staying in Spain
As the United Kingdom is no longer an EU member state, British citizens may stay in Spain for up to 90 days in any 180-day period without a visa, and must apply for a visa or residence permit for longer stays.
Since the United Kingdom uses the pound sterling (GBP) rather than the euro, buyers should factor in exchange-rate movements and currency conversion costs when paying for a property or transferring funds to Spain.
Frequently asked questions
Do I have to pay the arras deposit before the Spanish bank approves my mortgage?
Not necessarily. You can ask for the arras contract to include a clause making completion, and the deposit, conditional on a Spanish bank approving your mortgage within an agreed period. Colibrí Finances can start comparing lenders and gather a preliminary view before you sign anything, so you have a clearer idea of your position before money changes hands.
What happens to my deposit if my mortgage application is not approved by the bank?
If the arras contract includes a mortgage-approval condition and no Spanish bank approves the loan on reasonable terms within the agreed period, you should be able to withdraw and recover the deposit. Without that clause, a standard penitential arras can let the seller keep the deposit even if financing is the reason the purchase does not complete.
Can I sign the arras before I have a Spanish NIE or bank account?
In practice no, because the deposit is normally paid from a Spanish account and the NIE is needed for the contract itself and later for the notary. Most UK buyers arrange the NIE and open the account early, in parallel with the mortgage study, so both are ready when the seller wants the arras signed.
How long does mortgage approval take compared with the arras deadline?
Timelines vary by bank and by how quickly you provide payslips, your Self Assessment return and bank statements, but a preliminary view usually takes some weeks and a formal offer longer. We recommend negotiating an arras completion date, and a mortgage condition, that allows enough margin for a Spanish bank to finish reviewing your file properly.
Does the double taxation agreement affect how I pay the deposit or the mortgage?
The agreement between Spain and the United Kingdom mainly concerns how rental income or gains are taxed later, not how you pay the arras deposit or mortgage instalments. However, a tax adviser can confirm reporting duties to HMRC once you own the property, which is worth arranging alongside the mortgage study, not after completion.