Spanish Mortgages are available from most High Street Spanish Banks, Spanish Saving banks and International lenders in Gibraltar.
Most Spanish developers will have created some sort of mortgage or loan scheme to enable you to 'off-plan' purchases, but that these are only available on completion and will not cover any stage payments (normally 30% deposit). Sometimes, resale properties are offered with a mortgage in place that can be easily transferred.
Spanish Mortgage costs can vary greatly from lender to lender and also from broker to broker. In normal circumstances, you should allow around 2-3% of the purchase price of the property.
Also, there are up-front costs on a Spanish Mortgage are much higher than in the UK for a number of reasons.
First of all, Spanish Banks will charge an arrangement fee, ranging anywhere from .75% - 2% of the mortgage value, depending on the loan to value (LTV) ratio and the actual complexity of the arrangement. The larger fees are normally levied for 'non-status' lending or bridging finance and you should not pay more than 1.25% for a standard mortgage.
A mortgage tax of 1% of the interest due to be accrued over the term of the mortgage is also payable. For instance on a loan of €100,000 over 25 years at 3.5%, the total interest payable is approx. €50,990 making the tax payable €1000 + €509.90.
As you may or may not know, a Spanish Mortgage is not attached to the owner, but the actual property itself, it has its own title deed. You need to pay for the deed production, land registry and notary fees. The price can vary in different areas and depends on the property value..
Fees for valuation can vary, very much depending on the property, but you can budget about €200 for a small apartment.
Like a lot of brokers in the UK, the services of a Spanish Mortgage Broker can vary a fair bit. Some charge nothing and rely on the commission the banks pay them, others charge up to 1.5% of the mortgage amount. We highly recommend that you use a broker, especially if you want to use the self-certification route for obtaining a Spanish Mortgage. They are there to help smooth out the bumps and assist with the paperwork. They know which lenders are most flexible and can save an enormous amount of time and money.
The break-even point for a Spanish Mortgage as opposed to a UK mortgage or Remortgage is approximately five years, so if you are considering paying the mortgage off in full before then, you need to think about which way to proceed as it may be more cost effective to raise the funds at home.
How much can I borrow?
Generally, if you are a non-resident, you will normally be able to borrow 70%-80% of the value of a property. If you are a Spanish resident, you can easily borrow up to 100% of the property valuation. As always, the secret to obtaining the best mortgage amount is securing the best property valuation. This is the job of the Tasador (valuer). A lot of Spanish Mortgage Banks will accept 2 or sometimes 1 Tasador valuation, whilst some Spanish Banks employ their own.
Unless you are going for a self-certification Spanish Mortgage (which is available from www.TheSpanishMortgageLender.com) You will need to use your income as the determining factor in obtaining your Spanish Mortgage. The repayments have to be covered by around 40% of your NET income (after tax). Sometimes this is only up to 35%! If you want to purchase land, that is limited to 60% of valuation by most lenders, as is lending on 'Fina Rustica' property.
What currency should I borrow in?
As always, mortgages are available in the major currencies. However, if you borrow in a currency that does not have a fixed value against the euro, fluctuations in the currency could make your borrowing more expensive or less expensive depending on whether the currency you have chosen weakens or strengthens against the euro.
What Interest Rate I will pay?
The interest rates that you pay, will depend on the currency in which you borrow. The interest rates for mortgages in euros are based on the European Inter Bank Overnight Rate, or more commonly known as EURIBOR, which has largely overtaken the MIBOR. The lenders add a small margin over the EURIBOR rate. Fixed rate mortgages are available at slightly higher interest rates.
On Spanish Mortgages, interest rates are commonly reviewed annually, fixed rate mortgages are available at higher interest rates.
Usually, the maximum repayment periods are 15 to 20 years, but up to 35 years can also be arranged.
Banks often vary in the amount of information that they require, but in general, the more you can provide, the easier the loan is to procure.
What information will banks need?
Different banks vary in the amount of information they need, but generally, the more you can provide, the easier it is to get the mortgage. The following is a good start;
For the employed:
* 3 most recent wage slips
* Current P60
* Six months of bank statements
* Letter of reference from your employer
* Copy of Passport/residencia
For the Self-Employed;
* 2 years of tax returns
* 3 years of accounts
* Report from your chartered account, confirming earnings
* Six months of bank statements
* Reference letter from your bank
* Copy of Passport/residencia
Also;
For a specific property, the nota simple from the property registry, offer letter or sales purchase contract.
For a construction loan, you must have the Escritura for the land, a College of Architects stamp on the plans, together with a ten-year building guarantee.
Your lawyer or yourself can arrange for an NIE number from the local police station and a Spanish bank account, preferably the same bank as your mortgage.
Penny Searles
www.TheSpanishMortgagelender.com
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