Raising Finance in Spain
Loan to Values
Standard loan to values are up to 80% for non-resident mortgages in Spain and are always linked to the valuation of the property in Spain not the purchase price.
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 growing access through banks in Spain to Interest only terms and fixed rates. Fixed rates unlike the UK tend to be slightly higher than the prevailing variable rate.
Equity Release and Re-mortgaging in Spain
Releasing equity and remortgaging is available through select lenders in Spain. 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. 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 advisable in Spain without careful planning and advice.
Spanish mortgage terms range from 5 to 40 years, are dependent on age and Spanish finance provider selected. Most Spanish banks will expect the mortgage to be repaid by age 70 but it is possible to obtain a mortgage in Spain up to age 80.
All Spanish banks charge an arrangement fee for dealing with your mortgage in Spain. Spanish bank opening fees are payable at completion. All other costs in relation to the Spanish mortgage deed including mortgage tax, 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 by your lawyer.
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.
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 UK assets can be 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
- 3 month’s payslips
- 3 month’s bank statements
- Employer’s reference
- Copy of Passport
- Self assessment tax return
- Accountants reference
- 3 months bank statements
- Copy of passport
- Resident Document Requirements
- Contract of employment stamped by social security
- Vida Laboral
- La Renta
- 3 month’s nominas
- Bank reference
- Certificate of Autonomo or Escritura for SL
- Gestor reference
- 1 to 2 years Profit and Loss accounts
- La Renta
- Last 3 quarterly IVA returns
- 3 months bank statements
Some banks in Spain 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.