Articles :: Spanish Mortgages: The Facts
Let AUKPO help you with your research, and get the facts right before you buy
We have put together information that will enable you to get the right finance in place for you, to enable you to be comfortable with your package. Any specific questions then please e mail me at finance@aukpo.com and I will respond as soon as I can, Please be patient .
Mortgages in Spain, the useful bits!
How much can I borrow?
Spain, very much like the UK, lends according to the value of the property, your income and the classification of the area that the property is in. The latter generally reflects higher risk to the lender due to ‘Land Grab’ and local urbanisation issues. Urban Properties ie: Properties built on designated urbanised land, are the safest bet. Lending can be at 70%-80% of the value. If designated ‘Rustic’ whilst sounding quaint top tip, be extra careful, you may find a developer or local council building a road or property on your front terrace, or even on your own des res. The risk associated with this in lending terms can be that the lender will only lend a maximum of 50% of the value.
Mortgages in Spain, what types are there?
Again like the UK, most are capital repayment, but you can negotiate interest only for a couple of years at the start of the purchase. You can get fixed rates, but usually these attract a higher initial payment that protects the lender, very much like insurance, for the lender that you pay! Very strange!
Mortgages in Spain, How long to arrange?
Remember you are in Spain, it can take 2 to 6 weeks to arrange, but no matter how organised you are, the lender can create some delays that are to be honest totally avoidable. Get used to it, it will be worth it. Very much like the UK you pay a deposit and then you have to prove income etc. The deposit can be negotiated but generally is staged thus: 1% down payment and then firm payment once agreement made of up to another 9% of total agreed price. This then ties the buyer into you. You can tie into the agreement a common feature that is If the vendor withdraws once the deposit is paid they are committed to paying you twice the deposit back as a penalty.
Mortgages in Spain, How much will it cost me?
You will need to pay 10% of the agreed price (See above), and then unlike the UK you will then have to pay separate fees to the lender for the mortgage and like the UK a property tax. Watch out for unscrupulous agents who insert a clause that means you have to pay a buyers commission. It does happen be warned!
Charges and Taxes can end up being 12% on top of the agreed purchase price. Examine every charge minutely and challenge with the lender the ‘setting up’ charge. This should be no more than ½% of the loan amount, but you can find 2% written into the agreement.
Purchase Costs
7% IVA (VAT)
1% Stamp duty
1% Legal fees (there may be a minimum to pay)
Notary fees
Mortgage Costs
1% - 1.5% Set-up fee
1% Stamp duty (1% of mortgage value + 1% of total accrued interest)
Valuation fee
Notary fee
Arrangement fee (depending on the Mortgage Provider)
Mortgages in Spain, tell me about the Interest Rate?
Being in Europe the main currency is you’ve guessed it the Euro, now with the Euro comes the European Bank and with this comes the European Bank Base rate, this is called the EURIBOR. This changes ever month and is currently at about 4%, however careful research will show that this is still on the rise, check out www.euribor.org/html/content/euribor_data.html for historical figures. Very important if you are considering paying the extra, for a fixed rate mortgage. Current feeling is that the rise hasn’t stopped or peaked, Spain is being hit by bad press over property crashes, corrupt local councils and an ever expanding migration of labour throughout the Community for. The gap between UK and Spanish provided mortgages is being narrowed; however the strength of the pound against the Euro should also be built in, as a weaker euro will allow you to buy more for your Pound.
Spanish Mortgages- I know I have to repay them but how?
If you earn in Euros, then just set up your direct debit and away you go. However if in the Uk and earning sterling, two choices pay through an intermediary a fixed amount, which takes care of currency fluctuations, or why not dabble in the markets. It is accepted that by using a currency exchange specialist such as www.parasolfx.com
Transfer a minimum of £2000.oo into an account in Spain that has been set up in Euros and you will maximize the exchange rate and avoid paying commission to the Spanish bank to convert from sterling into the Euro.
(Check out our members articles to read of recommendations by members on services provided)
Spanish Mortgages – What documentation do I need
If you are employed you must produce
1. Passport
2. P60
3. Last 3 months pay slips
4. Last 3 months bank statements
5. Bank reference*
6. Employers reference *
7. Credit report *
Self Employed
1. Passport
2. Tax Return
3. Profit & Loss accounts for return
4. Balance sheet to date
5. Last 3 months personal & business bank statements
6. Bank reference *
7. Accountants reference *
8. Credit report *
* required for 80% borrowing
Spanish Mortgages, I don’t need a Spanish lawyer-Do I?
You could be brave, but also foolhardy! Ask yourself this question If in the UK would I use a Lawyer?
Of course you would, and Spain is no different. Check out our recommended legal services on our ‘partners page’. If you would prefer personal recommendation please contact me on legal@aukpo.com and I will e mail our members and ask for recommendations, please include the area that you are looking at buying in, so that I can target the membership with local knowledge. The lawyer will check that there is good title, hopefully identify Land Designation issues and generally re assure.
