Financing your property in Spain
If you require finance to buy your property in Spain, our finance partners, Financial North (possible link to our page?), will assist you in obtaining before your visit a mortgage decision in principle indicative terms from a lender, so that you have already made the necessary arrangements before coming to Spain and also know the price range of the property you would like to buy.
There are several options to finance the purchase of a property in Spain:
- Take a new mortgage in your home country or increase the mortgage (equity release).
- Take a new mortgage with a private bank in Spain or within Europe on your newly purchased property.
- Take a loan, using listed financial assets that would deposited and pledged with the lender.
- A combination of the three previous points.
Mortgages are, in most cases, very Tax Effecient in Spain. Cash buyers should consider Mortgages which are registered in Spain, as theycan mitigate or eliminate the Spanish “Impuesto del Patrimonio” perspective. This is a progressive tax, so the higher is the purchase price of the property the more taxes you would pay annually.
Also interest rates are historically low in Spain, therefore there is good opportunity to obtain a fixed interest rate for up to 25 years and make your money work harder in other investments by leveraging on your property in Spain.
Some international lenders do also provide mortgages in different currencies and up to 10 years of interest only payments.
In those circumstances where you need to complete a property purchase in short period of time, we can arrange and complete your mortgage at a later stage.
Spanish & International mortgages
Mortgages issued by Spanish or by an international bank for non-residents for a period of 5 to 25 years. If you live in Spain, you may be issued a mortgage over 30 years.
Normally it is possible to get a mortgage for up to 70% of the property value, although mortgages from 50% to 60% are also normal. In the case you pledge listed financial assets with the lender you can finance up to 100%.
If you opt for a mortgage of 50%, associated with the purchase of the property cost is deducted from the amount of the mortgage. In some special cases it may be possible to get a loan of up to 80%.
A mortgage must have been fully repaid as soon as the applicant is 75 years old. If you should be 64 years old already, you will only display a maximum of a 10-year mortgage.
As of December 2018, the typical interest rate on a mortgage in Spain is between 1.25% and 2.00%, depending on the type of loan and your financial profile.
In order to assess your application, the bank will want to see your last three payslips (your last P60 could also be useful). If you are self-employed, an insight into the last three years of your accounts with a letter of your Chartered Accountant confirming your total net income after taxes for the last 3 years and latest tax returns.
The exact list of documents required will depend on individual circumstances, but we'd love to be able to advise you individually prior to your visit in Spain.
When applying for a mortgage, household income is assessed. If you have a working spouse working, the bank will also want to see the pay slips or accounts.
In Spain, banks can only issue mortgage for a property being developed only after the house is completed. A new property will probably take months to complete.
However, it is still expected of you that you are making payments of up to 75% of the property value in various stages of completion.
To overcome this problem, the bank will issue you a letter of intent to then present these to your own bank in England or bank which here in Spain (we will help you to open an account). The MoU should be sufficient to place a temporary bridge financing for staged payments.
If your mortgage is less than 50%, then it may be possible for a large final payment on completion to negotiate with the client in order to avoid the need for a bridge loan.
Approximate monthly repayments on a mortgage of 100,000 euros:
|Estimated monthly payment, capital and interest, for a 15 years mortgage
|Estimated monthly payment, capital and interest, for a 25 years mortgage
You should estimate the cost of setting up a mortgage (lender’s arrangement fees,appraisal, notary, land registry etc.) to approximately 3.5% of the amount of the mortgage if the mortgage is more than 50,000 euros, or about 5% if the mortgage is under € 40,000.
Do you want to buy Villa? Your C & W Real Estate Ibiza team is pleased to advise you.