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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.
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
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.
This can be difficult, as not all Spanish Banks will help.
Again a UK remortgage would be a possible solution.
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.
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.
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.
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The loan repayments will usually be in euros. If the
money you are using to repay the mortgage is coming from
rental income paid to you in euros you will avoid the
risk of currency fluctuations |
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If you have heavy redemption penalties on your UK mortgage
a Spanish Mortgage may be more suitable |
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Spanish Mortgages are usually expensive to set up. Arrangement
fees, inspection fees, notary and land registration fees
often come to about four percent of the amount borrowed |
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The mortgage repayments are usually be in euros. If
you are repaying the mortgage in Sterling then your monthly
payments will be affected by fluctuations in exchange
rates between the pound and the euro, this can be substantial |
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Normally only repayment mortgages are available |
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You will probably need extra life insurance cover |
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The purchase of your Spanish property will depend upon
the Spanish Mortgage |
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On completion your Spanish Mortgage lender may impose
conditions on how you use the property. For example many
will not allow long-term lettings |
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We would expect a Spanish Mortgage offer to take longer
than a UK remortgage to arrange |
Should you like to talk to us in confidence about a Spanish mortgage
please do not hesitate to call on 01244 317788
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR FOREIGN PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
CHANGES IN THE EXCHANGE RATE MAY INCREASE THE STERLING EQUIVALENT OF YOUR DEBT.
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