Mortgages in Spain
Currently around half of UK buyers who purchase a property in Spain take out a mortgage through one of the Spanish Banks. The rates offered by Spanish banks, tend to be very competitive when compared to other borrowing options such as a re mortgage, equity release or personal loan in the UK.
As rule of thumb, the banks in Spain will lend up to 70% of the purchase price. This lending is of course is subject to a number of factors including the borrowers age, income, credit history, current financial commitments and valuation of the property they wish to purchase.
There are set up costs involved when taking a mortgage in Spain and you should budget for 2-3% of the loan amount, as part of your overall calculation of costs. Interest rates for mortgages are currently (Aug 09) around 3.5% – 4%
Releasing Equity from a property in the UK
The idea of equity release is to allow property owners to raise cash from their home’s value without selling and down sizing to a cheaper property.
Whilst it is rare that a buyer uses equity release to fund the entire purchase of a property in Spain. Equity release is often used to raise part or sometimes all of the deposit and additional costs associated with buying a home in Spain.
If you have a good relationship with your bank, income and of course sufficient equity in your UK home, a telephone call to your bank should be all it takes to find out how much you could borrow and importantly how much will it cost.
It’s worth having a look here too for some useful information http://www.thisismoney.co.uk/equityrelease
A big difference between UK and Spanish Banks
One of the frustrating things about banks in the UK, is the lack of them. Well certainly the lack of them on the high street and if you happen to be lucky enough to find one, the chances of speaking to your bank manager in person are slim at the very least. Now, one major, positive difference in Spain is that banking is all about building relationships. Speaking to your bank manager is easy and you will generally find the staff in banks to friendly and very helpful. Now more than ever, your bank manager in Spain will want to know you if they are going to lend to you.
Julia Gadalla from the MASA Mortgage Department helps hundreds of people every year to find a mortgage for their property in Spain. When I asked her about this “old school” way of banking, she replied “It’s true, once you get to know the people who work at the banks they will help and advise you to a level we are not used to in the UK. The banks are always willing to listen and help me and my clients who are looking for mortgages find the best solution possible”
Fixing your budget for a Spanish Property
It’s a good idea to work out how much you can afford to invest into a property in Spain, before getting too far down the line with property information or even viewings. Julia from the MASA Mortgage Department has supplied this simple 3 step process to getting that all important figure
1. Calculate how much cash/savings you want to set aside for the purchase.
2. If your cash or savings is not enough for an outright purchase of a property or the type of property you want, firstly look in to how you can raise the rest of the deposit. You will need at least 30% of the total purchase price. Speak to your bank/building society about your options in raising this finance, possibly through the release of equity from your UK property. Once you have done this, you have a clearer idea of how big a deposit you have.
3. Speak to someone expert in Spanish mortgages. They will be able to give you a guide to how much a bank will potentially lend you, and give you an idea on what the monthly mortgage payments will be. Before your Spanish Mortgage Advisor can give you these figures they will want to know how much of a deposit you will be able to put down, along with details of income and other financial commitments.
At this stage it is important to remember you are NOT making a mortgage application or committing to anything. You will however now have a good idea on how much you can potentially afford to spend on a property in Spain, should you find one that ticks all the boxes. Your Spanish Mortgage Advisor will also be able to tell you what documents you will need to supply if you decide to go ahead a mortgage application.
For further information on Spanish Mortgages, contact: mortgageinfo@masaint.es
