Can you sell a house with a mortgage in Spain?

Yes. A mortgage is security over the property, not a ban on selling it. The buyer, and above all the bank lending to the buyer, want the house free of charges, so your debt is settled with the sale money. There are three ways to do it:

• Pay it off at completion. This is the usual way: part of the price goes straight to your bank and the rest to you.
• Pay it off before selling, if you have the savings to repay everything you owe. It is rarely worth tying up that money early.
• Let the buyer take over your mortgage. This is called subrogation: the buyer assumes your loan on its existing terms. Under article 118 of the Spanish Mortgage Act, you are only released from the debt if the bank agrees. And the bank has to assess the buyer’s creditworthiness like any new customer’s (art. 11 of Law 5/2019).

A buyer taking over your mortgage mainly makes sense when your loan has a lower fixed rate than today’s: in September 2026, new mortgages with the rate fixed for more than ten years were signed at an average rate of 2.71% (excluding fees and insurance; provisional figure), according to the Bank of Spain. If you want to understand how it works, read the guide on what mortgage subrogation is.

How the mortgage is cancelled when you sell, step by step

1. Ask your bank how much you will owe on the completion date. If your mortgage was signed (or amended or transferred) on or after 16 June 2019, once you tell the bank you intend to repay the loan it has three working days to give you, on paper or another durable medium, the information on what that will cost, and your contract may require prior notice of up to one month (article 23 of Law 5/2019).
2. Check the nota simple (the Land Registry extract). Your mortgage shows up there and the buyer will see it, so the price and the outstanding debt should add up from the start.
3. Put it in writing in the arras contract (the deposit agreement): the house will be handed over free of charges and the mortgage will be cancelled out of the price on the day of the deed.
4. On completion day, the amount you owe is paid straight to your bank, by transfer or with a banker’s draft in its name, and the rest of the price goes to you.
5. Cancellation at the Land Registry. Paying off the debt does not remove the mortgage: your bank has to sign a cancellation deed before a notary, which is then registered. Until that happens, the mortgage still appears in the Registry even though you owe nothing.

That cancellation deed is exempt from AJD, the stamp duty on notarial deeds (art. 45.I.B.18 of the ITP and AJD Act). What you do pay is the notary and the Registry, plus a gestoría (administrative agency) if you use one.

What it costs to cancel your mortgage when you sell

The main cost is the early repayment fee, if your contract includes one. For mortgages signed on or after 16 June 2019, and for older ones amended or transferred to another lender after that date, Law 5/2019 sets these caps:

With a variable rate, the contract can only include one of the two options. And the fee can never exceed the bank’s financial loss, which the law requires to be calculated by comparing the capital you repay with the market value of your loan (art. 23.8). If market rates are above your mortgage rate, there is no loss and no fee is charged, even if the contract includes one.

If your mortgage dates from before 16 June 2019 and has not been amended or transferred since, your deed governs, within the legal caps in force when you signed: Law 5/2019 does not apply to those contracts (first transitional provision). For mortgages on a home signed by an individual from 9 December 2007, the early repayment compensation is capped at 0.5% during the first five years and 0.25% thereafter (arts. 7 and 8 of Law 41/2007). If the rate was fixed or reviewed over periods of more than twelve months, the bank may also charge the interest rate risk compensation set out in the deed, but only if the cancellation causes it a loss (art. 9). If you are unsure about yours, the guide on prepaying your mortgage in Mallorca explains how to read it.

There is one detail worth claiming: if your mortgage was signed (or amended or transferred) on or after 16 June 2019, when it is cancelled the insurance the bank offered you alongside the loan, with the bank as beneficiary, comes to an end, unless you notify the insurer that you want to keep it with a different beneficiary, and you are entitled to a refund of the unused part of the premium (art. 23.3 of Law 5/2019). If you paid for the life insurance in a single premium, it can be a sizeable sum. More on this in is mortgage life insurance mandatory in Spain.

What taxes you pay when you sell a home in Mallorca

Selling with a mortgage does not change the taxes on the sale, but it does change how much cash you have to pay them. There are two:

• The municipal plusvalía. A local tax on the increase in the value of the land, paid by the seller to the town hall (art. 106 of the Local Taxation Act). If the land has not gained value between purchase and sale, it is not payable, although you still have to declare the sale and provide both deeds. And if your real gain is lower than the figure produced by the town hall’s formula, you can ask for the tax to be worked out on the real gain (arts. 104.5 and 107.5).
• Income tax on the gain (IRPF). The gain is the difference between the sale price and what the house cost you, including the expenses and taxes of both the purchase and the sale. It is taxed as savings income at 19% to 30% in 2026, under the Spanish Income Tax Act. You declare it in the following year’s tax return.

The two most common cases in which that gain can be exempt are:

• You are over 65 and are selling your main home (art. 33.4.b of the Income Tax Act).
• You sell your main home and reinvest the proceeds in a new main home within the following two years (art. 38 of the Income Tax Act and art. 41.3 of its Regulation). The Regulation also accepts that you bought the new one in the two years before selling, which matters if you are considering a bridging mortgage in Mallorca. In both cases, a main home is, as a general rule, one you have lived in for at least three years in a row (art. 41 bis of the Regulation).

And here the mortgage does matter. If you bought the house you are selling with a loan, the amount you need to reinvest to make the whole gain exempt is not everything you obtain from the sale (the price minus the costs and taxes of selling), but that figure minus the capital still outstanding on the day of the sale (art. 41.1 of the Income Tax Regulation). If you sell for €420,000 and owed €160,000, reinvesting €260,000 is enough, or even slightly less, because the costs and taxes of the sale are also deducted from the €420,000. If you reinvest less, the exemption is proportional.

If you are not resident in Spain: the 3% withholding and the plusvalía

If you live abroad, the sale has two features you should know about before signing the arras:

• The buyer withholds 3% of the price and pays it to the Spanish Tax Agency with form 211 within one month of the date of sale (art. 25.2 of the Non-Resident Income Tax Act and the Tax Agency). If the buyer does not pay it, the property remains liable for that amount (or for the tax, if lower), so it is always in the buyer’s interest to withhold it.
• That 3% is a payment on account. Your actual tax is 19% of the gain, declared with form 210 within the three months following the end of that one-month period, according to the Tax Agency’s non-resident manual. If the withholding is more than you owe, you claim the difference on that same form.
• The buyer pays the municipal plusvalía on your behalf, because the law makes the buyer liable as a substitute when the seller is a non-resident (art. 106.2 of the Local Taxation Act). It is normally deducted from the price.

On a €420,000 sale, the buyer pays €12,600 to the Tax Agency on account of your tax. If you also have a mortgage left, that part is paid to your bank at completion, exactly as if you were resident. If you bought in Mallorca from abroad, the process may sound familiar from the mortgage for non-residents in Mallorca: cancellation works the same way for everyone.

What you actually walk away with: a worked example

A house in Palma sold for €420,000, with €160,000 outstanding on a fixed-rate mortgage signed in 2020 that includes the maximum fee:

The fee is only charged if the cancellation causes the bank a loss, and that happens when market rates are below your mortgage rate. In October 2026 the five-year IRS (swap rate) stood at 3.455% (Bank of Spain, Official State Gazette of 4 November 2026) and fixed-rate mortgages in 2020 were signed at an average below 2%, so in this example there would normally be no fee.

That still leaves the notary and Registry costs of the cancellation, your share of the sale expenses, the municipal plusvalía (if you are non-resident, the buyer deducts it from the price) and the income tax on the gain, unless it is exempt. If the mortgage were variable and more than five years had passed, the fee would be zero.

If you are selling to buy another home

What is left after cancelling is usually the deposit for the next one. You have three routes:

• Sell first and buy afterwards. The simplest: you know exactly how much you have.
• Buy before selling, with a bridging mortgage that finances the purchase while you still own your home.
• Take your loan with you to the new house. You can ask your bank to keep the loan and change the property securing it. It is not a right: the bank decides whether to accept after assessing the deal and the new security, and it means cancelling the mortgage on the house you are selling and creating a new one on the one you are buying, in a public deed registered at the Land Registry.

Whichever you choose, as a mortgage broker in Mallorca I run the numbers with you before you put a price on your home: what you will walk away with, what you can borrow for the next one and what monthly payment fits. Then I put your application to several lenders and explain each offer to you. I do it as an appointed representative of OVB Allfinanz España, a real estate credit intermediary registered with the Bank of Spain (D087), and if your deal carries an intermediation fee, I tell you in writing before we start: it appears in the FEIN and is included in the APR. If you would like to go through it with your deed in front of us, book a free first meeting.

This content is for information only and is up to date as of November 2026. Every case depends on your contract and your tax position, so check the figures against your own documents before signing.