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Q. I'm having problems with my Spanish mortgage repayments, what are my options?

Read our guide to the Spanish process of home repossession... click here.

Q. Can mortgage terms be extended?

Those who are having difficulties meeting their ever increasing monthly repayments will be happy to hear about a new law that has been passed and will shortly be implemented here in Spain.
You can increase the term of your mortgage thereby reducing payments.

There is a catch however, you can only take out a mortgage until the age of 70, therefore if you are 35 the maximum mortgage term would be 35 years.
If you are 45 the maximum term would be 25 and if you are 60 the maximum term would be 10 years.

According to Antonio Argandoña, professor of economics at the Navarra University IESE Business School as reported in the Christian Science Monitor, these measures will only have a limited effect. “Extending mortgage terms may help families who already have loans, but it’s going to impede access to new credit, since the banks aren’t going to be as interested.”

Most Spaniards have variable interest loans at low prices, with the average loan at EURIBOR + 0,76%, between 1% - 3% lower than what most would pay with a fixed-rate mortgage. In fact, Spain has, I believe, the cheapest variable-rate home loans in the world. Unfortunately, individuals are far less prepared to take on interest rate risk than banks.

After 19 straight central bank EURIBOR increases, and interest rates back at 2001 levels, many who took out loans when interest rates were low are hurting. As their pain increases, loan defaults go up; at the same time, contractors slow home building, economic growth slows, people lose jobs. The economy adjusts, almost automatically; it's all part of the economic cycle.
Therefore, we can conclude that the correction will not be a quick one, going by past trends we see that euribor is reaching the peaks similar to 2000 – 2001 before the introduction of the euro.

If you can meet the tight lending criteria of the banks in Spain then you could be in the game for a real property opportunity.
When a door closes for one person a window of opportunity always opens for another.

Q. Am I eligible for a mortgage?

A. The banks in Spain base their decision regarding your ability to repay the mortgage by looking at your net monthly income. Payslips, tax returns and / or bank current accounts are all required as verification of income amounts. They will normally also require the following documentation. This can vary from lender to lender:

All applicants need: Copy of passports, NIE number, bank reference

Employed

1. Last P60.

2. Last 3 month’s payslips.

3. Last 6 months Bank statements.

4. Employers reference confirming your role, length of service and current salary or copy of your employment contract.

Self Employed

1. Last Self Assessment Tax Return

2. Accountants Reference confirming gross and net income, plus drawings last year.

3. Bank Statements

Company

1. Incorporation deeds

2. Registration documents for Company (if SL Company)

3. If in Spain, C.I.F.Number

Retired

1. Confirmation letter from pension provider or pension slips.

2. Bank statements for last three months.

3. Last Self Assessment Tax Return/ p60

Q. I cannot prove my income. Can you still help?

A. We can help you find a loan of up to 50% of the valuation of Spanish property with minimum proof of income. Initially lenders require a bank reference letter, a copy of your passport and a signed self-declaration. It may be necessary to furnish additional information.

Q. Can I finance 100% of the purchase price?

A. This may be possible, but depends on the valuation of the property, and is more likely to be possible if you are buying an off-plan property. During the period between agreeing the purchase price and the completion date the value of the property will normally have risen. Some banks will use this final valuation and it may mean that 100% of the purchase price can be funded.

Q. What extra costs are involved in purchasing a property in Spain?

A. To buy a home in Spain with the help of a mortgage, you need to budget about 10-12% of the purchase price as cover for extra costs. Included in these costs are the following:

• Transfer Tax o­n a resale property
  OR IVA (Spanish VAT) o­n a new build

• Stamp Duty on a new build

• Lawyer fees

• Bank arrangement fee

• Fees: notary, gestoria & land registry fees

• Building insurance

• Broker fees

Q. How long will it take to obtain a mortgage?

A. Based on our experience of Spanish lenders and the mortgage application process, we can normally give a verbal indication within one to three days of whether your application is likely to be successful. This is subject to full application, required documentation and a valuation. once all the paperwork is sent to the bank the full process should take approximately four to six weeks.

Q. How do I apply for a mortgage?

A. Please contact VIP at your local branch and we will discuss your requirements based on the information you provide to us. We will then be able to make a recommendation based on this information and if acceptable, can then begin the mortgage process.

Q. Can I raise funds to build a property?

A. Yes, you can now raise funds for both the build and the land. As long as you have all the relevant building licences, permissions and architects plans, the lender will advance payment in stages as the building works progress. During this time, you will o­nly pay the interest due on the loan.

Q. Can I raise funding on my existing Spanish property if I own it outright?

A. Yes you can, depending on what you will be using the funding for. You can also re-mortgage if you only have a small mortgage outstanding. However, remember that as you will be creating a new mortgage, costs for both cancellation of your existing mortgage and the setting up of the new mortgage will higher than you are accustomed to in the UK (normally around 4% of valuation).

Q. Can I raise money to finance the deposit for an off-plan property?

A mortgage in Spain can only be set up o­nce the property has been completed and registered with the local land registry office. You cannot, therefore, raise the amount for the deposit, at the initial stage, through a loan on that property. Normally, individuals will raise this deposit by either cash they already have or be releasing equity on existing property they own in the UK. However, as the loan o­n completion can be based on the final valuation, some of this cost may be recouped o­n completion.

Q. Are mortgages available on properties held in the name of a company?

A. In theory, you can take out a mortgage on a property held by an SL Spanish Company, an Offshore Company and a UK Company. However, it is a more complicated process than doing it in an individual name. o­ne of our advisers would be pleased to go through your individual case.

Q. What is the provision of funds ?

A. This is a detailed list of all the costs involved in your purchase and you should receive a detailed breakdown of all these costs from your legal adviser before you go to the Notary. Your legal adviser can then give you a full explanation of each cost.
This includes costs the lender must hold by law and includes the following:

Tax on the mortgage deed

3% of the Capital Gains liability of the vendor (in the case of non-residents)

All fees (notary, registry and gestoria) for both the purchase and mortgage deeds

Stamp duty (for new properties only).

Vision Investment Property Almeria
Spain +34 902 887 254  or +34 617587903  Ireland +353 1 5241926
United Kingdom +44 2070433590 Fax: +34 950950231
Email: info@vipalmeria.com