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Untitled Document

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 Mortgages in Spain  House Insurance  Financial Advice

Banks in Spain and Offshore lenders provide mortgages for non-residents of Spain using the Spanish property as security

Loan to Values
Standard loan to values are 70% for non-resident mortgages in Spain and are always linked to the valuation of the property in Spain not the purchase price. It is possible to obtain 80% loan to value but access is limited, you will pay a higher interest rate and may be expected to pay a one off premium for a Mortgage Indemnity Guarantee (MIG), by the provider of the finance in Spain.

Most Spanish mortgages whilst linked to a percentage of valuation cannot exceed the price declared on the Escritura (title deeds).

Spanish mortgage product ranges
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 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. Fixed rate mortgages in Spain are available up to 15 years.

Equity release and Re-mortgaging in Spain
Because of the legal process of securing a loan in Spain it is more difficult and costly to make any changes to your Spanish mortgage post completion. Raising funds against an unencumbered Spanish property, releasing further funds, or changing the terms is controlled by the Bank of Spain and further tax; bank, and notary costs will apply. In Spain under the current legislation it is advisable to raise the maximum funding you require for your current and future needs, as any changes at a later date may not be possible and will be costly. Lender, product and rates need to be carefully selected to ensure they are the most suitable for your needs. Lender and product hopping, which is now standard practice in the UK, is not currently feasible in Spain.

Term
Spanish mortgage terms range from 5 to 30 years and are dependant on age and Spanish finance provider selected. Most Spanish banks will look for the mortgage to be completed by age 70 but it is possible to obtain a mortgage in Spain up to age 85 as long as you are under 65 at the time of application.

Costs
All banks in Spain 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 and 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 made fully aware of the provision of costs for completion.

Currency
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.

Underwriting criteria's
Most mortgages in Spain are only granted on a full status basis. Through IMS you can obtain a legitimate self-certified mortgage up to 50% of the valuation of the property. It is unwise to allow yourself to be talked into submitting false documentation and you should avoid brokers who offer this service. A fraudulent application could put your Spanish property and your deposits at risk if found to be so at a later date. Most Spanish banks will assess your income net of tax and will want to see that the combined existing UK and new Spanish monthly liabilities do not exceed 1/3rd of your proven monthly net income. It is possible with some banks to extend this ratio to 45% of net income and each bank in Spain will underwrite in a slightly different manner. In general Spanish banks will not take in to account any projected rental income from your Spanish property when assessing your application. There are no specific "buy to let" products currently available.

Benefits of raising finance in Spain
Low interest rates, and protection of your assets in the UK are some of the key benefits of borrowing in Spain, all alternatives should however be understood and considered before making a final decision.

Standard non resident document requirements for Spanish mortgages

Employed Applicants

  • 3 months payslips
  • P60
  • 3 months bank statements
  • Employers reference
  • Copy of Passport

 

Self employed

  • Self assessment tax return
  • Accountants reference
  • 3 months bank statements
  • Copy of passport

Resident document requirements

Employed

  • Contract of employment stamped by social security
  • Vida Laboral
  • La Renta
  • 3 months nomina's
  • Bank reference

Self employed

  • Certificate of Autonomo or Escritura for SL
  • Gestor reference
  • 1 to 2 years P & L
  • La Renta
  • Last 3 quarterly IVA returns
  • 3 months bank statements

Some banks in Spain providing Spanish finance may require you to supply your credit file from the UK or may check your credit file direct. Any loans subsequently granted will not be registered on your credit file in the UK.

UK: +44(0) 1438 360291
Costa del Sol: +34 952 815 681 Costa Blanca: +34 966 491 577