obviously has many meanings. In the context of mortgages, the Spanish
market currently lags behind in terms of the range of lending products
available and restrictions on the Loan To Valuation (LTV) and document
processing. The mortgage market in the UK is regarded by many as
the most advanced market of lending in the world, with applications
processed with some level of ease. Having said that, Spain is ever
evolving both in terms of the increasing number of financial institutions,
(including well known international lenders) and in the products
these new institutions are introducing to this competitive market.
asked questions about mortgages in Spain
much can I borrow?
two main determining factors, the property value and your income.
Value: As a general rule, Spanish residents can borrow up to
80% of the property value and non-residents up to 70%, though sometimes
less for higher priced properties. In some circumstances this can
be 95% and 80% respectively. Note that the valuation and the purchase
price can differ widely.
Again, as a general rule, Spanish banks will accept that up to 35%
of your net income will be used to repay borrowing. Borrowing may
include your domestic mortgage if the purchase is a holiday home,
and other loan commitments. It is a family purchase then multiple
incomes can be used.
Why not 100%? I've
seen the adverts!
we, but they are usually marketing ploys. 100% mortgages
in Spain do not exist except in exceptional cases for residents
and usually involve third party guarantees. However, 100% finance
can be arranged but that is a different thing. If you already own
one ore more properties in Spain with little or no mortgage outstanding
then this can often be arranged. (Also see question
How many years can
I repay over?
mortgages traditionally are from 5 to 15 years and should be completed
by the age of 65 or 70. However, things are starting to relax more
in Spain and terms of up to 30 years are now obtainable.
no absolute maximum to the number of applicants. For example if
you are in, say, your late 50s but would like a 25 year mortgage,
it is possible to add one or more of your children or other family
members to the mortgage, and the mortgage term can be based on the
Will the valuation
be the same as the purchase price?
not. Valuation methods in Spain can differ from other countries
and guidelines to valuers are issued by the authorities, sometimes
with suggestions they should down-value to avoid overheating of
property price rises.
for mortgage purposes, the value can be as simple as the square
metreage of the property, multiplied by a figure per square metre
determined by recent local sales. Views, conditions, specific location
and other aspects may be ignored.
it is not unusual for a property to only value at 80% of the asking
price, it is also know for a valuation to be over 150% of the purchase
price. Your maximum mortgage amount is based on the value.
What paperwork do
banks appear to be lovers of every piece of paper available, but
remember, they are only trying to protect the interests of their
depositors. Most of the papers required will be readily at hand
to a reasonably organised person, or at least readily available.
tax returns, pay-slips, employers reference, bank reference, accounts
if self-employed, copy of passports, proof of purchase deposit,
mortgage or rent receipts are typical.
What will it cost?
will typically charge an opening fee of 0.75% to 2.0% of the approved
loan. Interest rates vary between lenders and special offers are
sometimes available. Most banks charge a penalty for early or partial
repayment, typically 1%. A mortgage broker can often negotiate special
deals and terms in view of the large number of applications they
place with the lender.
Is buying through
a company really a good idea?
can be for tax purposes. As a general rule the initial and ongoing
costs of this route make it only worthwhile if the equity in the
property or properties exceeds one million euros. Of you wish to
pursue this route, contact your mortgage broker or solicitor for
Why not take out the
mortgage at home?
institutions and Spanish subsidiaries of foreign companies can securitize
a loan on Spanish properties.
Why not release equity
in my property at home and pay cash?
possible but not often advisable, other than for raising enough
to top up a maximum mortgage available here. It is not generally
advisable to have an asset in one currency and the loan to purchase
it in another. Exchange rate and property price fluctuations make
this an additional risk.
and most important, interest rates in Spain are generally lower
than elsewhere. If it is your personal preference, for whatever
reason, the mortgage can be arranged in any major currence.
What is black money
and how does it affect a mortgage?
It is common,
though technically illegal, on a resale property to have a low declared
value. Typically, say the selling price is 250,000 euros, then the
vendor may request the transfer to show 180,000 euros with the remaining
70,000 euros being paid in cash. Black money. Although illegal it
is commonplace, but you must consult your solicitor before agreeing.
news is that you save a lot of money. The typically quoted 10% buying
costs are based on the lower value. However, if not careful you
could be in line for a fine if discovered, and when you come to
sell the property you could be liable for a hefty capital gains
tax bill. The practice is generally acceptable, but the mortgage
cannot usually exceed the low declared value.
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