Mortgages in Spain

Availability: Mortgages on Spanish properties are available, up to 70% of the value.

Main lenders:
Most Spanish banks (Sol Bank, Deutsche bank, BBV and Bank of Atlantico) and Building Societies (Halifax, Norwich & Peterborough, Royal Bank of Scotland, and Abbey National) will offer mortgages for properties purchased on the Coast. Properties bought off plan can also be mortgaged, on completion. The bank will enter into agreement with the purchaser and the loan can be increased up to a maximum of 70% of the valuation of the completed property.

It is important to remember:
Spanish mortgages are written into the Escritura (title deed), thus linking them to the property and not to the person borrowing the money. Like most aspects of property purchase in Spain, your Abogado (Spanish lawyer) can obtain a mortgage for you. However he will probably be dealing with one bank and one sort of mortgage. We, at houseban can arrange your mortgage, choosing from a variety of lenders, after appraising your personal circumstances and applying to the appropriate lender.
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Mortgage costs:
Depending on which lender has been selected to provide your mortgage:

• The arrangement fee will be between 1% and 1.5% of the loan.
• The to valuation fee will be between EUROS 150.00 to 210.00.
• There will be additional the notary costs, taxes, property registration and legal fees of the lender.
• Life assurance to cover the amount of the mortgage is available in the form of straight term insurance, or an endowment style policy with the appropriate life cover attached, which will give you a cash lump sum when the policy matures. We will advise you on the benefits of each and provide you with the relevant quotations, for you to chose from. The cost will depend upon individual age and health status.

Property valuation:
The amount you can borrow will depend on the valuation of your property. Obviously, the higher the valuation, the more you can borrow, given the general guide that a non resident can borrow 60% - 70% of the valuation of a property, whilst for residents this figure can go up to 80% of the valuation. It is the job of the Tasador (valuer) to achieve the best possible valuation. There are independent Tasadors, but some banks will accept valuations from a variety of companies, others have their own Tasador, but the resulting valuations can vary considerably.

The maximum amount you can borrow will also depend on your income. In general the rule of thumb is that you will be advanced up to 3 times your gross annual income, but usually the monthly repayment should be under 33% of your net disposable income.

Currency of mortgage:
Mortgages are available in most major currencies. We strongly advise however, that you set up your mortgage in EUROS. This safeguards your risk of exposure to currency fluctuations. Your monthly repayments will also fluctuate if you borrow in a currency, which does not have a fixed value against the Euro, depending on whether the currency of your mortgage weakens or strengthens against the Euro. Some UK lenders will only lend in Pound Sterling, however and if your circumstances dictate that you use one of these lenders then we will advise you accordingly.

Interest rates:
Interest rates for mortgages in Euro are based on EURIBOR (Euro Inter Bank Offered Rate). The EURIBOR rate at the time of writing (Jan 2002) is 3.2%. The lenders will normally charge EURIBOR + 1.25% but individual circumstances will determine the exact interest rate, which could be higher or lower.
Fixed rate mortgages can be arranged at slightly higher rates of interest.
It is common to find that some lenders offer a lower "Start up" interest rate of 3.75% for the first year then go up to EURIBOR + 1.25% from year 2 onwards.
Interest rates will vary depending on the currency you choose to borrow.

Interest rate review:
Interest rates will be reviewed annually, on the anniversary of the loan, then fixed for the period of one year until the next anniversary.

Maximum repayment term:
In general, the maximum repayment term is 15years, but up to 25 years can be arranged. This will be dependent on the age of the borrower. The eldest partner must not go beyond his 70th birthday by the end of the term of the mortgage. This means that for a couple, where the eldest partner is currently 55 years old, the maximum repayment term on offer would be 15 years.

Early repayment:
Most lenders will permit early repayment. The cost of this will vary from zero to 1% depending on the loan. Some lenders charge for cancellation only in the first 5 years. You must let us know if you are considering an early repayment option, so we can choose the appropriate lender for you.

Documents required:
The documentation required will vary from one lender to the next. As a general guideline we have listed most of the paperwork you are likely to need, it is a good idea to prepare much of these as soon as possible.
If you are employed you will need to produce:

• Last 3 wage /salary slips.
• Last income tax declaration (P60 in the UK) or evidence of latest annual tax assessment (if you live in a tax-free environment then this is not applicable).
• Copies of current bank statements (last 6 months).
• Bank reference letter.
• Letter from your employer confirming date of employment and proof of income.
• Copy of passport / residence permit (residencia) if you are resident.

If you are self-employed you will need to produce:
 

• Latest income tax declaration (where applicable).
• Copies of the accounts for the last 2 / 3 years.
• Chartered Accountants Company report, confirming your annual personal drawings from the company.
• Copy of your passport / residence permit (residencia) if you are a resident
• Personal bank statements (6 months).
• Bank reference letter.

You will also need:
 

• The nota simple from the property registry, offer letter of sales/purchase contract, we will provide the relevant document.
• NIE number from the local police station, which we can arrange.
• A Spanish bank account, with on-line internet banking facilities, we can guide you on this.

Note:
Bank charges and commissions for transferring money from the account vary considerably from bank to bank. It is useful to select a bank with online banking facilities to enable you to check if the bills have been paid in your absence and to transfer funds without paying commission.

We will help you:

• To choose your lender, carefully considering all of the many variables that need to be considered, including the location and type of property.
• Keeping up to date with all the banks current offers, terms and conditions, knowing their requirements and matching them to those of the client is a highly specialised job, which is why we use our in-house independent mortgage advisor at HOUSEBANK.
• Should you have any questions or require more information please don't hesitate to ask.

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