Why Buy Property in Tenerife?

Tenerife has become one of Europe’s hottest real estate markets. With year-round sunshine, tax advantages for international buyers, and a growing remote work community, investing in Tenerife property offers exceptional value. Whether you’re seeking a holiday home, rental investment, or permanent residence, understanding mortgage options in Tenerife is crucial for smart property buying.

Mortgage Options for Buying Property in Tenerife

1. Spanish Bank Mortgages

Most international buyers secure financing through Spanish banks, which typically offer fixed-rate mortgages and variable-rate options. Key points:

• Loan-to-Value (LTV): Spanish banks typically offer 60-70% LTV for non-residents, up to 80% for residents
• Fixed rates in 2025: Currently ranging from 2.5% to 4.2% depending on your profile
• Mortgage term: Usually 15-30 years, with some lenders offering up to 35 years
• Requirements: NIE number (foreigner identification), proof of income, Spanish bank account

Bankinter and Banco Sabadell are popular choices for foreign buyers in the Canary Islands.

2. International Mortgage Brokers

Working with specialized Tenerife mortgage brokers can streamline the process. They compare rates across multiple Spanish banks and handle paperwork in English. Expect broker fees of 1-2% of the loan amount.

Mortgages Spain specializes in Canary Islands properties.

3. Foreign Bank Financing

Some buyers leverage equity from properties in their home country. This option offers familiarity but may not provide the best exchange rates or tax benefits.

Fixed Rate vs. Variable Rate Mortgages in Tenerife

Fixed Rate Mortgages

Pros:

• Predictable monthly payments
• Protection against interest rate increases
• Ideal for long-term property holding
• Current fixed rates are historically competitive

Cons:

• Slightly higher initial rates than variable options
• Less flexibility if rates drop significantly
• Early repayment penalties can be steep (2-4%)

Variable Rate Mortgages

Variable rates in Spain typically follow the Euribor index plus a bank margin (usually 1-2%).

Pros:

• Lower initial rates
• Potential to benefit if rates decrease
• More flexible early repayment terms

Cons:

• Monthly payments can fluctuate
• Risk of significant increases during economic uncertainty
• Harder to budget long-term

Step-by-Step: Getting a Mortgage in Tenerife

Step 1: Get Your NIE Number

Your NIE (Número de Identidad de Extranjero) is essential for all property transactions in Spain. Apply at Spanish consulates or immigration offices in Tenerife.

Step 2: Choose Your Property Wisely

Research property hotspots in Tenerife:

• Costa Adeje & Los Cristianos: High rental yield areas
• Puerto de la Cruz: Traditional charm with strong expat community
• Santa Cruz: Capital city with excellent infrastructure
• La Laguna: UNESCO heritage town, university area

Step 3: Mortgage Pre-Approval

Get pre-approved before making offers. Required documents include:

• Passport and NIE
• Last 3 months’ payslips or proof of income
• Tax returns (last 2 years)
• Bank statements (last 6 months)
• Employment contract or business ownership proof

Step 4: Property Valuation & Legal Checks

Banks require independent property valuation (€300-600). Hire a Spanish lawyer to verify property title and any liens or debts.

Step 5: Sign Mortgage Deed

Finalize at a Spanish notary. Budget for:

• Property transfer tax: 6.5% in Canary Islands
• Notary fees: €600-1,500
• Land registry: €400-800
• Legal fees: 1-1.5% of property value

Tax Benefits for Property Buyers in Tenerife

The Canary Islands offer special tax advantages:

• Lower transfer tax: 6.5% vs. 10-11% in mainland Spain
• IGIC (Canarian VAT): 7% vs. 21% mainland VAT on new builds
• ZEC (Special Canary Islands Zone): 4% corporate tax for qualified businesses
• No wealth tax: For properties under €1 million (conditions apply)

Rental Income Potential in Tenerife

Tenerife’s tourism economy creates strong rental income opportunities:

• Short-term vacation rentals: 6-10% annual yields in tourist areas
• Long-term rentals: 4-6% yields with stable income
• Digital nomad market: Growing demand for 3-12 month rentals

Register with the Canary Islands Tourism Registry (RIC) for legal vacation rentals. Consider property management companies for hassle-free income.

Best Banks for Tenerife Mortgages

1. Bankinter: Excellent service for non-residents, competitive fixed rates
2. Banco Sabadell: Strong presence in Canary Islands, flexible terms
3. BBVA: Good digital platform, competitive rates for residents
4. Santander: International presence, multi-currency options

Common Mistakes to Avoid When Buying Property in Tenerife

• Not budgeting for additional costs: Plan for 10-15% extra beyond purchase price
• Skipping independent legal advice: Always hire your own lawyer, not the seller’s
• Ignoring property licenses: Verify all building permits and tourist rental licenses
• Underestimating currency fluctuations: Use currency hedging for large transfers
• Rushing the process: Due diligence takes time – allow 2-4 months for completion

Tenerife Real Estate Market Outlook

The Tenerife property market shows strong fundamentals:

• Property prices increased 8.5% in 2024, with moderate growth in 2025
• International buyer interest remains high, especially from UK, Germany, and Nordics
• New development projects focused on sustainable, energy-efficient properties
• Digital nomad visa driving demand for rental properties
• Limited supply in prime coastal areas maintains price stability

Frequently Asked Questions

Can non-residents get mortgages in Tenerife?

Yes, Spanish banks offer mortgages to non-residents, typically up to 60-70% LTV. You’ll need an NIE number, proof of income, and Spanish bank account.

What are current mortgage rates in Tenerife?

Fixed rates range from 2.5-4.2% for 15-30 year terms. Variable rates follow Euribor + 1-2% bank margin.

How long does mortgage approval take in Spain?

Typically 4-8 weeks from application to approval, assuming all documentation is complete. Total purchase process takes 2-4 months.

Are there tax benefits for buying property in Tenerife?

Yes – lower transfer tax (6.5% vs. 10%+ mainland), reduced VAT on new builds (7%), and potential wealth tax exemptions under €1M.

Should I choose fixed or variable rate mortgage?

Fixed rates offer stability and predictability – ideal for long-term buyers in the current market. Variable rates suit those comfortable with risk and expecting rate decreases.

Conclusion: Your Tenerife Property Investment Starts Here

Buying property in Tenerife is an exciting investment in lifestyle and financial future. With competitive mortgage rates, favorable tax treatment, and a thriving rental market, there are excellent opportunities for international buyers.

The key to success is thorough preparation: secure your NIE, compare mortgage options carefully, budget for all costs, and work with experienced local professionals.

Living in Tenerife isn’t just a dream – with the right mortgage strategy, it’s an achievable reality.