Many ex
pats living in Spain and especially those from the UK are finding it
difficult to meet their Spanish mortgage payments. £ versus
€ exchange rate fluctuations have eroded the real value of UK
earnings and pensions and the rising cost of living has meant that
the budget doesn't stretch as far now as it did just a little while
ago. Everyone's personal circumstances are different so there can be
no one size fits all solution that will enable you to enjoy more of
what life has to offer here in the Spanish sunshine. Maybe you are
contemplating a property purchase here and just want to know the best
way to go about raising finance. In any event our CeMap qualified
advisers are waiting to give you a FREE unbiased and discrete
consultation to select the solution that is right for you. Our
Lifetime Mortgages and Equity Release plans offer a NO NEGATIVE
EQUITY GUARANTEE and it costs nothing to find out if our services can
make a real difference to your lives without the continuing worry of
lack of funds or high mortgage repayments.. You worked hard to buy
your home so why not let your home work for you? Our advice is FREE
and there is no obligation for you to act on any advice that we give,
it is entirely up to you. Send us a mail or call us and we will call
you at a time convenient for you and talk through the options.
SPANISH
MORTGAGES - GENERAL INFORMATION AND GUIDE
If you
would like to know whether or not it would be possible borrow the
amount you are looking for, please contact me with your preliminary
enquiry and I will either reply to your email or contact you via
telephone if I require further information in order to be of
assistance. Or you can call me on 0034 966 716063
In the
meantime I have provided some standard information.
Interest
rates generally on offer range from Fixed and Variable linked to the
Euribor from 5% subject to status and the percentage of the mortgage
borrowing. Repayments are due in Euros and so will fluctuate with the
exchange rate of any foreign currency. Once the funds have been
released and the rate set, this rate then applies to the account for
a given period depending on the mortgage product. This can bimonthly,
quarterly, half yearly or yearly variable. After the given period,
the interest rate is then reset depending on the current Euribor rate
at that time.
Mortgages
are available up to 80% for Non Residents and 100% for Residents of
Spain subject to the mortgage valuation but this is often restricted
to a maximum of the Purchase Contract or even the price being
declared in the Escritura. Spanish banks can only lend on the basis
of a mortgage valuation. Mortgage valuations are carried out as
prescribed by law in Spain, and are NOT a market valuation. Spanish
law requires that valuations be set by reference to the recorded
transaction values of at least 6 similar properties, which have been
sold in the area in the preceding 6 months. The valuer derives an
average price per square metre from these comparison properties, and
this is then multiplied up by the size of the property to arrive at
the mortgage valuation. This valuation therefore excludes VAT,
Property Transfer Tax, Stamp Duty and all the other costs of buying
the property.
Where a
property is bought "off-plan", we can lend on the mortgage
valuation, which will be done at the end when the property is ready.
If prices continue to rise, this may be 100% or more of the agreed
price. In this case we can lend 100% of the agreed price, but no
more. This is because if the mortgage is more than the declared
value, the tax authorities will suspect that the property has been
under-declared, and the transaction could be investigated and the
buyer could be penalized. A similar situation can also arise where
part of the price is paid in cash and the full amount is not declared
on the Escritura - we can get 80% of the valuation, but this is often
restricted by the amount being declared.
If you
are looking to purchase a resale property and it happens to be a
rural one (sometimes known as 'Rustico'), then the mortgage
valuations can sometimes prove difficult for a number of reasons and
they are:
1)
Sellers often insist that the price of their property is under-declared
on the Escritura (Deed) and that part of the price is paid
unofficially to avoid tax. The mortgage is often restricted by this reduction.
2)
Mortgage valuations are based on comparison values taken from the
Property Register, so will only reflect declared values. On average
these are 20% below the full market price.
3)
Mortgage valuations are essentially only "bricks &
mortar" valuations - the value of any very large plots of land
is not included.
4)
Mortgage valuations are only based on the size of the property
recorded in the property Register - very often owners have not
registered the full size to avoid tax.
5) We
can only obtain mortgages on properties that are registered for
residential occupation. Again to avoid tax, rural properties were not
always registered in this way.
To
check the registration status, we need to see a "nota
simple" this is an extract from the Property Registry which
gives us the necessary information needed. This really needs to be
considered as a priority before you make any commitment to buy the
property and in particular, if it's a rural or inland village
property. You may find that the maximum mortgage obtainable will be
around 60% loan to value.
Our
status guideline is that you're total mortgage and loan repayments,
rent, and other commitments (including the new mortgage in Spain),
should not exceed 45% of your net disposable income (That is the
maximum; the norm is 30 - 35%.
There
is no equivalent in Spain of "buy-to-let" mortgages in the
UK. We cannot take potential future rental income into account. We
may be able to take some of the rental income into account if the
property has already been rented and there is proof of the income
received and tax paid on it, or - if new - if the developers are
renting other properties on the development and they can give us
details of the rents being generated.
We then
add this to your UK income and then apply the 45% affordability
ratio. This will normally work out as being a "top-up" of
between 10% and 20% of the price, and in any event your UK income
always has to be the main source of income.
We can
obtain a maximum term of 40 years up to age 80 on normal or 'status'
applications where income is available to show the lender. A mortgage
for a purchase or even a re-mortgage (to release capital) from your
property is now a fairly common theme in Spain. The maximum Loan to
Value is 60%.
The
fees our lenders charge for obtaining the mortgage are a valuation
fee of around 0.15% of the property value and an application fee of 1
to 2%. In addition, there are other taxes and costs which you have to
pay for registering the mortgage: stamp duty of around 2% is charged
on a mortgage deed; and notary and registration fees of around 1% of
the mortgage amount. These taxes and fees are in addition to the
costs involved in buying the property.
A
mortgage in Spain is a Notarial act and so cannot be changed. It is
advisable to give the amount you want to borrow a great deal of
thought as you will incur costs if you need to ask your mortgage
Lender for additional funds or to change anything further down the
line, and this includes extending the mortgage term. However, you can
normally overpay your account by up to 10% per year in order to repay
it sooner than the official term stated without a penalty.
When
and if you decide to sell your property and the new buyer wants to
take over your mortgage, then an early redemption fee will not be charged.
You may
also be able to negotiate with your lender to waive the fee if you
take out a new mortgage with them. If your Spanish property is your
main home, then you will need to prove that you have a guaranteed
income, which may also be a pension or investment income. If you will
be working in Spain, then you will need to supply your new contract
and up to 6 months' pay slips. If you are planning to set up a
business or buying an existing one, then you will need to supply
satisfactory accounts before a mortgage Lender could grant a mortgage.
If you
are buying an off plan property then the property will have to have
been completed and registered before the Lender will grant the
mortgage because until then the property does not exist. The contract
you sign with the builder at the start is not a purchase contract,
but a contract committing you to buying the property at a future date
and when the property has been completed. Any stage payments are an
unsecured loan to the builder and it is important that your solicitor
confirms that the builder has obtained a bank or insurance guarantee.
Remember that many builders do not do this. Mortgage Lenders will not
normally finance the stage payments during the construction period.
However, we can obtain up to 80% maximum once the property is
completed and registered even if you have paid more than 20% in stage
payments. It may be possible to arrange a re-mortgage of your UK
property for the amount to cover the stage payments if you have
insufficient savings. It is important to be aware that a new property
cannot be registered until the 'Certificate for First Occupation' has
been issued in most cases. This can sometimes take 2 or 3 months and
maybe longer after the property has been completed and the
certificate issued by the local town hall. This needs to be chased so
that you do not experience problems and delays with completion. This
is the way to proceed but some less honest builders will try to make
you pay before the certificate has been issued which is not possible
if you need a mortgage.
If you
are buying a country property then it must be registered as a
"Vivienda" (residential dwelling) in order for it to be
mortgageable. If the property is not registered a vivienda, but just
agricultural land then legally the building does not exist and
consequently cannot be mortgaged. This is why we ask to see a copy of
the "Note Simple" (the extract from the Property Registry)
You will need to obtain these documents whilst you are in Spain and
forward them to me if possible. If a country property is not
registered as a vivienda then you must consult your independent solicitor.
For
further information then please me or call me on 0034 966 716063
An
enquiry does not commit you to anything at this stage and you do not
have to wait until you have found the property before you send the
enquiry. You can send it in advance so that I can consider issuing an
"approval in principle" based on your current financial
situation, before you commit yourself to a purchase.
Finally,
a mortgage takes about 6 weeks from start to finish due to the time
it takes to gather all the relevant documents.
I look
forward to hearing from you.
Here
are some of the towns where we currently have properties for sale:
Spanish
mortgages and property solutions
