Spanish Mortgages
You may wish to take out a mortgage on your Spanish property. We arrange these with a selection British banks that are registered and do business in Spain.
It is not possible to take out a mortgage on your new Spanish property from your local branch of a UK building society or bank. However, in principle, the mortgage concept in Spain is similar to that in England. It is a loan secured against the land or buildings and if you do not keep up the payments the bank can repossess your property
There are, however, many differences between an English and a Spanish mortgage. Interest only mortgages are not common and Spanish mortgages are almost always created on a repayment basis. In addition, there are often penalties for early payment of the loan. The arrangements can be more complicated than the UK and most Spanish mortgages are granted for 15 years or to age 70 whichever is earlier.
Fixed rate loans are more common than in the UK. The maximum loan is no more than 80 percent of the value of the property. 70% advances are more common.
The calculation of affordability is significantly different with most Spanish Mortgages. Spanish Lenders by and large do not use income multiples as most UK lenders do. Instead they usually allow you use around 30-35% of your income after tax and any existing credit arrangements (including any UK mortgage payments)
Your loan is based on your joint net "take home" pay and is calculated on an affordability basis. All your existing liabilities including any mortgage/rent payments, personal and bank loans and any maintenance payments together with your proposed Spanish mortgage payments must not exceed 35% of your net monthly income.
For example: joint monthly take home pay = £ 2800. 35% of that figure is £980 minus existing monthly mortgage payment £350 - No other liabilities. This leaves a figure £630 for a proposed Spanish Mortgage payment.
There will usually be a minimum loan (say £20,000) and some banks will not lend at all on property less than a certain value. Some will not lend in rural areas. A UK remortgage may be suitable in these circumstances.
The way of dealing with stage payments on new property, and where funding is needed for restoration, is different.
The paperwork on completion of the mortgage is different. There is often no separate mortgage deed, with the mortgage mentioned in your purchase deed. It is prepared by and signed in front of a Notary.
Application for a Spanish mortgage
Whether you are employed or self-employed will make a difference. Your status will need to be checked and credit searches made. Applications can receive preliminary approval - subject to survey and good title - within a few days. You should allow four weeks from the date of your application to receiving a written mortgage offer. It can take longer.
Once you have received the offer you will have 30 days to accept the offer. You cannot accept it for 10 days from the date of receipt to allow a period of reflection. This can be a problem if you are in a hurry.
You should arrange for the mortgage to be explained in detail by your lawyer. We can arrange for introductions to English Speaking Spanish Lawyers. For more details call us in confidence on 01244 317788
Payments for New Property
Unlike in the UK, in Spain when buying a new property you usually make payments as the development progresses and take ownership at the end.
This can be a problem for Spanish lenders, as you do not own anything you can use as security until the final payment is made. A UK remortgage usually gets around this problem
Once you have ownership of the property, the normal monthly payments will begin
Properties in poor condition
This can be difficult, as not all Spanish Banks will help. Again a UK remortgage would be a possible solution.
The cost of setting up a Spanish Mortgage
A Spanish mortgage usually has charges totalling around four percent of the figure borrowed. These charges are in addition to the normal expenses incurred when buying a property, which normally amounts to about 10-11 percent of the property price.
In addition, most Spanish banks require you to take out life insurance for the amount of the loan, although you may be allowed to use a suitable existing policy. You may need a medical and will have to produce proof of property insurance, which you should have anyway.
Be careful to watch out for early payment penalties, which are common.
The Exchange Rate Risk
If the money you are using to repay the mortgage is from your UK earnings then the amount you have to pay will be affected by fluctuations in exchange rates between £ sterling and the euro. This can significantly affect your monthly costs.
How we can help
As specialists in Spanish mortgages we deal with a range of UK Banks that are registered to offer mortgages in Spain. Even though most of our clients prefer to remortgage their UK properties, this is not the most appropriate route for everyone.
If you prefer to raise a mortgage in Spain then we know the lenders that offer these facilities. However, not only can we introduce you to a suitable lender, we also have good working relationships with these institutions and can save you much time and effort by liasing with them for you. Do remember, however that while we take all reasonable steps will be taken to secure the loan on your overseas property as soon as possible, Spanish legal and administration system may cause delays which are outside of our control.
Advantages of a Spanish Mortgage
Disadvantages of a Spanish Mortgage
Should you like to talk to us in confidence about a Spanish mortgage please do not hesitate to call us on 01244 512247
