Mortgage for your Spanish property
A lot of people are dreaming about owning a property in Spain. Others are convinced that a Spanish property in the sun is not achievable for them. This is a shame because there certainly are possibilities to buy your property abroad through financing.
More often than not the purchase is delayed until after, for example, retirement. Taking the annual increase of house prices into account this could cost the buyer a lot of money.
Loan to Values
Standard loan to values are up to 70% or 80% for non-resident mortgages in Spain and are always linked to the valuation of the property in Spain, not the purchase price.
Most Spanish mortgages whilst linked to a percentage of valuation cannot exceed the price declared on the Escritura (title deeds).
Spanish mortgage product range
Finance in Spain is predominately linked to a variable rate and on a repayment basis. Spanish variable rate products are generally linked to the yearly Euribor (European inter bank offered rate) and your interest rate will be reviewed yearly. Your interest rate for the first 12 months is determined by the Euribor at the month of completion plus the fixed margin above that which your selected Spanish bank is charging. Some offshore banks can provide mortgages in sterling secured against your Spanish property purchase, linked to the Bank of England base rate.
There is limited access through banks in Spain to Interest only mortgages and fixed rate Spanish mortgages including a "flexible mortgage plan". Fixed rates, unlike the UK, tend to be significantly more than the prevailing variable rate and the fixed rate term is generally the total term you can hold the mortgage for.
Spanish mortgage terms range from 5 to 40 years and are dependent on age and Spanish finance provider selected. Most Spanish banks will expect the mortgage to be repaid by age 70 but it is possible to obtain a mortgage in Spain up to age 85.
All Spanish banks charge an arrangement fee for dealing with your mortgage in Spain. Spanish bank opening fees are not payable up front and do not apply if you decide not to take up their offer of lending. All other costs in relation to the Spanish mortgage deed including mortgage tax, registry costs and some of the purchase deed costs are deducted from your gross mortgage advance. It is not possible to add your costs to the Spanish mortgage unless your valuation level allows you to. It is important to check you have accurately assessed and accounted for all expenses to ensure you are not left short of funds for completion day. We would suggest you allow at least 12% of the purchase price to cover your purchase and finance costs in Spain in full and that you make sure you are fully aware of the provision of costs for completion.
If you take a Spanish mortgage with a mainland Spanish bank the capital provided and repayments will be in euros. Offshore lenders can also take security over your Spanish property and many will provide the funds and take repayments in any major currency of your choice. Your interest rate will be linked to the base rate of the currency you select. For most Euro mortgages this will be the yearly Euribor.
Calculate in advance
Especially when you come to Spain (in the near future) to view some of your favourite properties, it is good to know in advance what your financial possibilities are. It could be a big disappointment for you if, in retrospect, you are not able to make your dream come true because you can´t get the mortgage you need. Therefore, it is wise to make an appointment with a mortgage consultant before you leave for Spain. He can tell you exactly what the possibilities are. In that case you will be prepared and can go on your viewing trip without worrying.
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