Owing to the fact that Spain is a much sought after destination with global investors, and retirement and second home buyers, there is an active and vibrant Spanish mortgage market. You will find more than two hundred local banks that are willing to lend to foreign buyers. In addition to this, there are many institutions from UK and Germany (from where most of the buyers in Spain come from), who provide a broad range of mortgage deals and home finance to their citizens.
If you are looking for a Spanish mortgage guide there are several websites that go into the details. One should ensure that the information provided by the sites is as up to date as possible.
Spanish mortgage guide-a general view
- You can usually borrow seventy percent of valuation or the purchase price, whichever is on the lower side.
- Most banks usually impose an arrangement fee of one percent of the mortgage amount.
- Additionally there is a stamp duty of 1.8% of the mortgage amount, which is mandatory by law.
- To add to that there is a Notary fee of a couple of hundred Euros with regard to the mortgage.
- Clients who are self employed will need a bank reference and an accountant’s reference.
- It is seen that some banks may also ask for additional information such as bank reference, bank statements, UK mortgage statements and employer’s reference.
- Your monthly mortgage payments should not go over 35-40% of your net monthly income.
- Expected rental income of the property in Spain will not be taken into account by the bank when calculating affordability.
- Traditionally terms of only 10 or 15 years were available from Spanish banks, but now however, one can repay the mortgage over up to 30 years or the age of 70.
Spanish mortgage guide-types of mortgages and interest rates
Almost all Spanish mortgages are capital repayment but some may include an interest only term. There are fixed rates but the rates of interest are high. However, the Spanish mortgage market is constantly improving and the range of mortgage options has grown over the last couple of years.
A Spanish mortgage guide will reveal ‘EURIBOR’ is the term used for the interest rate in Spain. This changes every month and is the base rate of the European Central Bank. You will find that four percent is a good indicator of the mortgage rate for non-residents. Spanish mortgages are a lot more affordable in comparison to the average of 6% rate of interest on mortgages in the UK.
Spanish mortgage guide-Spanish mortgages v UK mortgages
First of all it makes sense to have the asset and the liability in the same currency. This helps to minimise one source of uncertainty and risk, the Euro-Sterling exchange rate. Secondly, the interest rates at present on Spanish mortgages are lower than those on British mortgages, and are expected to remain lower for the foreseeable future.
Thirdly, if the plan is to rent out the property and use the income to help finance the mortgage, then it makes sense to have the monthly mortgage repayments in the same currency as the rental income. Finally, most UK mortgage lenders are not geared up to deal with lending against Spanish property.
It is advisable to start arranging the Spanish mortgage as soon as one decides to buy a Spanish property. Leaving the financial side of the property purchase till the end is not deemed favourable.
The above article is an attempt to give you a glimpse into the Spanish mortgage guide. |
