Buy property in Tenerife — real cases from practice
Anonymised examples of how buyers financed their property in Tenerife.
In short
How much can non-residents borrow?
Banks finance non-residents up to a fixed share of the bank or purchase value depending on country and profile; the remainder plus acquisition costs is equity.
Second home or main residence?
For the bank it is the difference between a holiday loan and one that must run twenty years. Tax residence is a separate question for a tax adviser.
Which tax applies?
On new builds the Canary IGIC replaces the mainland IVA, plus AJD; on resale, standard-rate ITP — lower than the mainland rates.
Across the 6 financings documented here, purchase prices ranged from €685,000 to €1,980,000. Every figure appears in the individual case report.
How long does a mortgage on Tenerife need to run?
Almost every report from Tenerife describes the same transition. The second home becomes the centre of life. Retirement after working life, a home office in the sun, an early plan for passing property to the next generation. And repeatedly a decision for the island capital rather than a resort. Buying that way calls for a mortgage that carries twenty years, not a holiday loan. Which brings the age limit into view. Spanish banks measure the term by the borrower's age at the final instalment, not at signing. A younger co-borrower can extend the term and reduce the instalment, even without qualifying income of their own, but must go on the title deed with a share of at least 10 percent. In the Canaries resales carry transfer tax of 6.5 percent and new builds 7 percent IGIC plus 0.75 percent AJD instead of the mainland rates. Documented purchase prices range from 685,000 to 1,980,000 euros. The remainder comes from the buyer's own funds.
Property financing in Tenerife
The following case reports show, in anonymised form, how different situations in Tenerife were financed for non-residents. Creditworthiness, the property and the bank's loan-to-value are always decisive.
Two things make Tenerife different from the mainland, and both change the numbers rather than the process.
The tax bill is lower than on the mainland — but not by as much as people say
On a resale purchase the Canary Islands charge transfer tax (ITP) at a standard rate of 6.5%. The claim that the Canaries charge no ITP is simply wrong, and it has cost buyers real money: it understates closing costs by roughly 6.5% of the purchase price. The tax base is the higher of the purchase price and the cadastral reference value, so buying below that reference value does not lower the bill.
Reduced rates of 5%, 4%, 1% or 0% exist, but they attach to a primary residence and to personal circumstances — under 35, large families, disability of 65% or more, protected housing. A non-resident buying a second home pays the standard rate. Treat the reduced rates as the exception they are, not as the normal case.
On a new-build purchase the islands charge IGIC at 7% instead of the mainland IVA of 10%, plus stamp duty (AJD) at a standard 0.75%. The real saving against the mainland is therefore 0.5 to 3.5 percentage points on a resale (6.5% against 7–10%) and around 3 points on a new build. Worth having — not the tax haven the brochures imply.
The regional detail, including which municipalities carry which rate and how the reference value works, is set out on Tenerife property for sale — regions, costs and financing.
Valuation, letting licence and the north–south split
Tenerife divides sharply. The south — Costa Adeje, Los Cristianos, Playa de las Américas, El Médano — is premium tourism with strong letting demand and correspondingly firm prices. The north around Puerto de la Cruz and Santa Cruz is year-round living, cheaper per square metre, and valued more conservatively by lenders because the resale market is thinner.
That difference shows up in the tasación, the bank's own valuation. Lending is capped at 70% of the lower of purchase price and valuation, and on the islands the valuation comes in below the agreed price more often than on the mainland — particularly for older stock and for properties bought in a rising market. Any shortfall is equity you have to find at short notice.
If letting is part of the plan, check the licence position before the offer, not after. Holiday letting on the Canaries requires registration and several municipalities restrict new licences; whether a lender will count rental income at all varies from bank to bank, and most will not count income that depends on a licence you do not yet hold.
From our practice
Practical case Tenerife: Exclusive villa in Costa Adeje
The dream of year-round life on the Canary Islands
Practical case Tenerife: Modern apartment in Los Cristianos
The first residence on the Canaries after working life
Practical case Tenerife: Apartment in Santa Cruz de Tenerife
Living in the island capital rather than a holiday resort
Practical case Tenerife: Apartment in Playa de las Américas
From second home to centre of life
Frequently asked about financing in Tenerife
How much can non-residents borrow?
What does the consultation cost?
A similar situation in Spain? Let's talk.
Every financing in Spain is an individual case. In a free initial consultation I will tell you honestly what is feasible and which bank fits.
Book a free consultationAnonymised individual case, not a binding statement for other projects · Siegfried Perini for the owner Olga Nikushkina · §34i GewO · no tax or legal advice · no financing commitment; conditions depend on creditworthiness, loan-to-value and bank